The newly developed gold (Au) coated silver (Ag) wire exhibits axi-symmetrical free air ball (FAB) formation under atmosphere similar to Au wire. FAB of coated Ag showed better corrosion resistance than FAB of alloyed Ag, as Au dissolved along the periphery of Ag FAB forming into a solid-solution, Ag-Au alloy. Composition of the solid-solution Ag-Au alloy along the periphery ranges between 10 and 28wt% of Au. The diffusion depth of Au is 4μm from surface towards the center of FAB. For precise measurement of the diffusion length of Au into Ag, a solid thin layer is been parted using focus-ion beam (FIB). The solid thin layer is further thinned down to observe in Transmission Electron Microscope (TEM) and analyzed using line scan energy dispersive X-ray analysis (EDX) attached to it. Near the neck of FAB and wire, Au diffusion is high up to 58wt%. On thermal ageing at 150/175°C for 500/1000h, the coated Ag wire bonded to Al-0.5wt%Cu pad revealed no degradation on ball pull/shear. Bond interface revealed significant growth of silver aluminide (AgAl) to a thickness of 3μm for 1000h of ageing and the growth rate fits to square-root power law.