In this work we describe the interaction of Pd with Si1−xGex layers in terms of structure, composition and electrical properties. Strained epitaxial layers of Si1−xGex with x=0.09 and 0.18 were grown on Si (100) by Molecular Beam Epitaxy (MBE) at a growth temperature of 550°C, to a thickness of 3300Å and 2300Å, respectively, and then capped with a 100Å Si layer. At low temperatures (around 250°C), the formation of a ternary phase Pd2Si1−xGex along with small amounts of PdGe takes place. At high temperatures (around 550°C), the interaction is characterized by the formation of a double layered structure, where a Ge rich Si1−xGex region is formed between the Pd2Si1−xGex compound and the unreacted Si1−xGex. The high temperature treatment results in strain relaxation in the epilayer below the compound region. Electrical characterization of diodes formed from these layers clearly shows they are rectifying, with Schottky barrier heights around 0.65 eV.