Abstract: The novel solid phase diffusion process combined internal oxidation of alloy with powder metallurgy technique is used to produce silver cadmium oxide material for electrical conact in present work. Microstructures and characters of prealloyingAg-Cd powder made by the solid phase diffusion method and Ag-CdO composite powder made by the internal oxidation method have been investigated by optical microcope, seanning electron microscope, electron diffraction and x-rays diffraction, respectively, The performances of contact material were also tested. It has been found that this kind of contact material has good physical, mechanical and electrical properties. It would be possible to decrease the dimensions of contacts(CJ10-40 type of contactor)to about 50% therefor it can be concerneed as an effective saving silver measure. Internal oxidation of the fine alloy powder made by solid phase diffusion process is carried out at relatively low temperature. and the time duration is remarkably shorter than that required in conventional internal oxidation process. Therefore it is also a fine saving energy technique.