In this work, the effects of hydrogen reduction on the microstructure and thermoelectric properties of (GeTe)0.85(AgSbTe2)0.15 (TAGS-85) were studied by a combination of gas atomization and spark plasma sintering. The crystal structure and microstructure of TAGS-85 were characterized by X-ray diffraction(XRD) and scanning electron microscopy (SEM). The oxygen content of both powders and bulk samples were found to decrease with increasing reduction temperature. The grain size gradually increased with increasing reduction temperature due to adhesion of fine grains in a temperature range of 350 to 450 °C. The electrical resistivity was found to increase with reduction temperature due to a decrease in carrier concentration. The Seebeck coefficient decreased with increasing reduction temperature and was in good agreement with the carrier concentration and carrier mobility. The maximum power factor, 3.3 × 10−3 W/mK2, was measured for the non-reduction bulk TAGS-85 at 450 °C.