Abstract The evolution of microstructure and interfacial defects in β-quenched and thermally aged Zircaloy-2 is studied by positron annihilation, hardness and ultrasonic measurements. Defect-sensitive positron lifetime and S-parameter have shown an increase during isochronal aging treatment in the temperature range of 673–873 K, which indicates defect production as a consequence of intermetallic phase formation. Hardness measurements have revealed an increase beyond 473 K, a plateau between 673 and 873 K. At 973 K, the hardness value falls slightly below that of quenched sample, indicating the retention of as-quenched state. The hardness variation is qualitatively consistent with that of positron annihilation parameters. Ultrasonic velocity measurements have revealed complementary variations. Metallographic studies have shown evidence towards the existence of hard intermetallic phases between 673 and 873 K, based on which the observed experimental results are explained.