Age-hardening behaviour and the related microstructural changes were studied to elucidate the hardening mechanism of Pd-Ag-Sn-In-Zn alloy by means of hardness test, XRD, SEM. It is shown that the increase of hardness during the early stage of age-hardening is related to the formation of intermediate precipitate phase at the grain boundary. The single phase solid solution matrix and the lameUar-like precipitate phase similar to pearlite were observed at the grain boundary by SEM. The hardness is decreasing with the coarsening of the stable second phase.