Neutron irradiation can reduce the flaw tolerance of cold-worked Zr-2.5 Nb. One possible way to retrieve the good fracture properties is to remove the irradiation damage by heat treatment. The results of experiments have shown that a short heat treatment can be effective; for example, 10 min at 550°C reduces the velocity of delayed hydride cracking by a factor of six and increases the fracture toughness by a factor of four at 240°C without reducing the strength below the specified value. The annealing out of dislocation loops formed by the neutron irradiation is responsible for much of the improvement in properties, but decomposition and breakup of the β-phase in the α-grain boundaries and precipitation of β-Nb in the α-grains also contribute to the changes.