In this research it was shown that the electroless plated palladium deposited as large number of randomly oriented grains, which were separated by grain boundaries (GB). The nano-scale dimensions of these grain boundaries allowed the diffusion of helium through the palladium membrane. This implied that in a dense palladium membrane, the grain boundary network was so convoluted that helium flux could be neglected. The transmission electron microscope (TEM) images of the palladium at room temperature showed grains of about 50 nm in size and nuclei of about 5 nm in size. The TEM images of a pre-annealed Pd sample at 500ºC in hydrogen atmosphere for 48 hours, showed big grains of 100 to 200 nm in size and most of the grain boundary intersections had dihedral angles very close to 120°. However, the pre-annealed Pd sample at 500ºC in helium atmosphere for 48 hours, showed grains of the size of 70 to 100 nm and many of the grain boundary intersections did not show dihedral angles of 120°. This proved that high temperature annealing not only caused significant grain growth and grain boundary (straightening) migration, but also the grain boundary migration was faster in hydrogen than in helium atmosphere. Also, the hydrogen and helium characterization of the palladium membranes showed that the leak formed faster in hydrogen than in helium. Thus, combining the TEM observations with the membrane characterization results, it is possible to conclude that grain boundary migration is one of the most probable reasons for leak formation in palladium composite membranes. The TEM images of the pre-annealed Pd sample also showed that the grain boundaries can achieve an equilibrium configuration within 48 hours of annealing at 500°C in hydrogen. This research helped in better understanding of the role of grain boundary migration on the leak formation in the composite palladium membranes and this information can be useful for the production of leak resistant stable membranes in the future.