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In this paper, the effect of annealing temperature on the optical properties of palladium thin films has been investigated. The Pd thin films with thickness of about 123 Å were deposited on glass substrates by electron beam coating method. Then the palladium thin films were annealed in air at 350℃, 450℃, 550℃ and 650℃ for 1h and then cold slowly. All the initial Pd films were found to have amorphous structure. Their optical properties were studied as function of annealing temperature using Ultraviolet-Visible (UV-Vis) spectroscopy. The direct band gaps in Pd films have been de- termined. Decreasing the values of the direct band gap shows also increasing the Pd crystallite nanostructure with increasing annealing temperature