Abstract Lattice mismatch in a bimetallic core–shell nanoparticle will cause strain in the epitaxial shell layer, and if it reaches the critical layer thickness misfit dislocations will appear in order to release the increasing strain. These defects are relevant since they will directly impact the atomic and electronic structures thereby changing the physical and chemical properties of the nanoparticles. Here we report the direct observation and evolution through aberration-corrected scanning transmission electron microscopy of dislocations in AuPd core–shell nanoparticles. Our results show that first Shockley partial dislocations (SPD) combined with stacking faults (SF) appear at the last Pd layer; then, as the shell grows the SPDs and SFs appear at the interface and combine with misfit dislocations, which finally diffuse to the free surfaces due to the alloying of Au into the Pd shell. The critical layer thickness was found to be at least 50% greater than in thin films, confirming that shell growth on nanoparticles can sustain more strain due to the tridimensional nature of the nanoparticles.