Neodymium-doped PZT layers with Ag/Pd inner electrodes showed a metal-like conductive behaviour after degradation under electric fields of 250–1250 V/cm at 420–520 °C. This conductive state was studied by means of impedance spectroscopy. Depth profiling by mechanical removal of material revealed a strongly inhomogeneous distribution of conduction paths within a degradation zone located in the interior of the ceramic layers, probably along grain boundaries. The thickness of the degradation zone (several tens to hundreds of micrometres) increased with degradation time and DC load. After complete mechanical removal of the degradation zone, virgin PZT was again found. Spatially resolved conductivity measurements (microelectrodes) and conductive atomic force microscopy (C-AFM) investigations gave further information on inhomogeneities in conductivity and the connectivity of surface precipitates. A mechanistic model is provided suggesting formation of silver paths along grain boundaries according to a mechanism which strongly differs from conventional electrochemical dendrite formation.