A new approach to the development of very thin Pd2Si-to-Si contacts for possible future use in ultrasmall devices is described. It is based on the principle of diluting the silicide-forming metal (Pd in this case) with Si, by codeposition of these two elements onto a single-crystal Si substrate. The composition of the codeposited layer has been chosen as Pd 80Si20, which is a metastable alloy with an amorphous structure. During annealing of the layered structure, Pd is extracted from the amorphous alloy to form the metal-rich and very stable compound Pd2Si at the interface. At the same time, the decomposing Pd80Si 20 is also converted in Pd2Si. In this way a silicide is formed for which only ∼50% of the required Si need be supplied by the Si-substrate, resulting in a very shallow silicide contact. In the illustrated case, with 400 Å of Pd80Si20 on Si〈100〉, only ∼80-100 Å of substrate Si is consumed. The microstructural properties of the formed silicide have been studied by in situ transmission electron microscope experiments, while the electrical characteristics of Pd 2Si-to-Si Schottky diodes, fabricated by this technique, have been studied by Schottky barrier height (SBH) measurements from the current-voltage curves. By choosing the annealing treatments of these two sets of identical specimens, the microstructural and electrical properties could be correlated. It is shown that overannealing of a Pd2Si-to-Si contact formed in this way should be avoided, since this gives rise to a lowering of the SBH. Finally, it is demonstrated that initially bad Schottky diodes (ideality factor n≳1) can be restored to a good n?1 condition by annealing.