In this work we observed strain relaxation at 550-degrees-C following the interaction of palladium with strained Si1-xGex epilayers. The germanium concentrations x in the Si1-xGex films were 0.09 and 0.21 with thicknesses of 3500 angstrom and 2300 angstrom respectively, which are below the critical thickness h(c). An overlayer of palladium, 1300 angstrom thick, was deposited onto the Si1-xGex epilayers, and the samples were annealed at 250 and 550-degrees-C in a vacuum furnace for compound formation. Low temperature anneals (250-degrees-C) were characterized by the formation of a uniform, highly textured ternary compound (Pd2Si1-yGey with y < x) on top of the unreacted Si1-xGex layer, and no substantial change in the state of strain was observed in the underlying unreacted Si1-xGex layer. On the contrary, a higher temperature anneal (550-degrees-C) of metallized samples was characterized by the formation of a double-layer structure, with a highly defected germanium-rich Si1-zGez layer (0.37 < z < 0.43) between the ternary compound and the underlying unreacted Si1-xGex. In these samples a considerable decrease in the vertical lattice parameter and correspondingly strain relaxation in the unreacted Si1-xGex layer was observed.