Over a temperature interval between 300 and 1225 K an annealing experiment is performed aiming to investigate the electronic structure of submicrocrystalline palladium by means of magnetic susceptibility. To produce submicrocrystalline structure Pd specimens severe plastic shear deformation is used. An analysis is made of the essential excess of susceptibility of deformed palladium over that of the initial polycrystalline palladium, an excess that persists after deformed palladium had hen annealed at T 5 825 K. The excess of susceptibility is explained by the change in the density of states on the Fermi level due to atomic defects introduced by severe plastic deformation. Results of microstructure and microhardness investigations are also presented.