Grazing incidence X-rays diffraction (GI-XRD), X-rays reflectivity (XRR) and positron annihilation spectroscopy (PAS) analysis on Pd– Mg thin bilayer films deposited by electron-gun on Si wafer and glass substrate evidence a two-region structure: (i) a surface region consisting of the Pd capping layer, the Mg–Pd interface and some Mg subinterface layers; because of the interface roughness, in this region the deposited Mg layers are encased in Pd and, upon the metal to deuteride phase transition, they became highly compressed by the Pd capping layer; (ii) a second region consisting of a pure Mg layer, which extends up to the substrate. This two-region structure is stable upon repeated D 2 absorption and desorption cycles. PAS analysis reveals the formation of vacancy-like defects after D 2 desorption at a concentration higher than that of the as-deposited sample. The two-region structure and the defect dynamics observed in the present study can explain the presence of two peaks in the deuterium desorption spectrum and the diminished D 2 storage efficiency after the first D 2 absorption and desorption cycles. D 2004 Elsevier B.V. All rights reserved.