The morphology and the atomic scale structure of thin gold films (up to 2.5 ML) on Pd(1 1 0) were studied by means of scanning tunneling microscopy and surface X-ray diffraction. At room temperature the films exhibit a multilayer growth mode accompanied by the formation of highly anisotropic islands. Annealing above 500 K significantly increases the smoothness of the gold films, which are in registry with the substrate. Above a critical threshold of two monolayers a (1 × 2) missing-row reconstructed film is found. This reconstructed surface is well ordered after annealing at temperatures above 580 K. The specific gold film morphology is envisaged as a way to relax the strain caused by the mismatch between gold and palladium.