The dislocation density near the surface of Hg.sub.1-x Cd.sub.x Te alloys is substantially reduced by annealing the material at around 600.degree. C. in a mercury saturated ambient for periods of four hours or more, prior to post annealing at lower temperatures to control the metal vacancy concentration. This procedure allows dislocation reduction by climb, reduces the concentration of metal vacancies which can collapse to form dislocation loops or contribute to dislocation multiplication, and reduces tellurium precipitates which contribute to dislocation multiplication during subsequent post annealing.