Internal strains in cluster-compacted nanocrystalline Pd (crystallite size 10–20 nm) were studied by means of wide-angle x-ray scattering. The strain- and size-induced broadening of the Bragg diffraction peaks was determined by Hall or Warren–Averbach analyses. The Warren–Averbach analysis indicates a spatial confinement of internal strain fields. This result supports theoretical models according to which the sources of the stresses are located in the interfaces between the crystallites. Indirect further evidence for a stress localization is derived from recent findings on the variation of internal strains and atomic displacements with the crystallite size. In addition, an anisotropy of the line broadening was observed which cannot entirely be attributed to planar defects (maximum concentration 0.04) but indicates enhanced microstrains in the crystallographic⟨100⟩directions compared to the⟨111⟩directions. Based on this strain anisotropy, various distributions of microstresses are discussed taking into account the substantial elastic anisotropy of Pd. ©1997 American Institute of Physics.