In this study, a PdAl (20 nm)/Au (30 nm) metal stack scheme is used for forming low-ohmic-resistance contact on Mg-doped (1.5 × 1017 cm−3) p-type AlGaN at various annealing temperatures. Using a circular-transmission line model, the specific contact resistance (ρc) of PdAl/Au/p-AlGaN ohmic contact is determined via the current–voltage (I–V) characteristics. As-deposited contacts demonstrate non-linear behavior. However, the contact exhibits linear I–V characteristics with excellent ohmic contact of ρc = 1.74 × 10−4Ωcm2, when annealed at 600 °C for 1 min in a N2 atmosphere. The Ga and Al vacancies created at the PdAl/Au and p-AlGaN interfaces, which act as acceptors to increase the hole concentration at the interface. The out-diffusion of Ga as well as in-diffusion of Pd and Au to form interfacial chemical reactions at the interface is observed by X-ray photoelectron spectroscopy (XPS) measurements. The phases of the Ga–Pd and Ga–Au phases are detected by X-ray diffraction (XRD) analysis. Morphological results show that the surface of the contact is reasonably smooth with the root-mean-square roughness of 2.89 nm despite annealing at 600 °C. Based on the above experimental considerations, PdAl/Au/p-AlGaN contact annealed at 600 °C is a suitable p-ohmic contact for the development of high-performance electronic devices.