In this paper, we describe a novel method of synthesis of bimetallic Ag–Au alloy nanoparticles with an estimated Ag to Au concentration ratio of ∼3:1 by using a gas-aggregation cluster source. The real time chemical changes occurred on the surface of the alloy film during different stages of annealing at an elevated temperature are observed by in-situ x-ray photoelectron spectroscopy analysis. It is found that the concentration of both Ag and Au of the alloy film simultaneously decreases with the increase of the annealing time. The chemical states of the elements present on the surface are analyzed from the HR-XPS data, which are recorded for the dominant elements present on the surface. From the analyses, it is found that a small part of metallic Ag gets oxidized for higher annealing time whereas no trace of oxidation of Au is observed. The surface morphology of the as-deposited and post-annealed alloy films are characterised by FESEM and AFM measurements. Due to thermal diffusion of Ag and Au, resultant narrow size distributions of the bimetallic Ag–Au nanoparticles are observed on the surface. The film morphologies suggest that the evolutions of bimetallic Ag–Au nanoparticles are nearly spherical in shape with an average aspect ratio value of ∼1.5.