Two-step annealing (i.e. first in Cd vapor and second in Te vapor) is essential process for obtaining high quality CdZnTe (CZT) materials. During the post-growth two-step annealing, main defects in CZT, that is, Te inclusions, were successfully removed while maintaining its resistivities. Additionally, commonly observed nano-scale defects, that is, dislocation and stacking faults in CZT were also disappeared. A Frisch-grid CZT detector made via the two-step annealing process exhibited improved energy resolution and low backscattering counts in Cs-137 gamma spectra. In this presentation, we will present the evolution of nano-scale defects in annealing process through in-situ transmission electron microscopy (TEM) measurement.