Microstructural reactions of Pd/Ge/Ti/Au contact to AlGaAs/InGaAs pseudomorphic high electron mobility transistor with an undoped GaAs/AlGaAs cap layer have been investigated using cross-sectional transmission electron microscopy, and the results are used to interpret the electrical properties of the ohmic contact. In the as-deposited state, a quaternary phase of PdxAlGaAs containing excess Ge atoms is formed at the interface of Pd/AlGaAs and some microvoids exist at the Pd layer in the vicinity of the interface. When the ohmic metals deposited on the undoped cap layer were annealed, the lowest contact resistivity of 9.1×10−5 Ω cm2 is obtained at 380 °C. AuGa compound is formed at the PdGe/undoped-AlGaAs interface as a result of the reaction between the ohmic metal and the undoped GaAs cap. This is due to the fast in-diffusion of Au toward the undoped AlGaAs through grain boundaries of the PdGe compound. The layer structure is changed to TiO/AuGa/PdGe/AuGa(TiAs+epi-Ge)/undoped-AlGaAs. The AuGa compound enhances the creation of group III vacancies, and the in-diffused Ge atoms occupy the vacancies. Thus, a number of electrons are produced below the contact, which plays a role in reducing the contact resistivity. For the ohmic metals deposited on n-AlGaAs by removing the undoped cap layer, the annealing temperature at which the contact resistivity has the minimum value of 2.3×10−6 Ω cm2 increases to 460 °C. The Au2Al is additionally observed at the PdGe/n-AlGaAs interface. Consequently, the layer structure is changed to TiO/AuGa/PdGe/AuGa+Au2Al(TiAs+epi-Ge)/n-type AlGaAs. The formation of Au2Al at the PdGe/n-AlGaAs interface creates more group III vacancies. Thus, the contact resistivity is further reduced by the incorporation of the in-diffused Ge into the group III vacancies. The InGaAs channel layer is observed to be intermixed in the annealed sample. This evidences the production of a large number of the group III vacancies via electrons below the contact.