Pd nanocrystals (NCs) are successfully embedded in a TaN/SiO 2 /HfAlO/Si structure. The initial memory window increases at a higher rate with increasing fabrication temperature of Pd NCs compared with the linear variation of Pd NC density, which is related to the thermally induced neutral traps in the HfAlO film around Pd NCs. After manufacturing a TaN/SiO 2 /Pd NCs/HfAlO/Si/Al structure, the subsequent N 2 plasma treatment is conducted at 300 C for 3 min. The number of leakage current paths in the SiO 2 blocking layer adjacent to TaN is clearly reduced, but that of leakage current paths in SiO 2 /HfAlO around Pd NCs is slightly increased owing to the thermal stress. The thermally induced neutral traps in the HfAlO film around the Pd NCs can be passivated by nitrogen atoms, which leads to the improvement of the final memory window for the Pd NC samples fabricated at 600-700 C. However, the intrinsic traps in the HfAlO film play an important role in memory characteristic and the final memory window is reduced by thermal densification for the Pd NC samples fabricated at 500 C.