The currently used cold-rolled AgCu10 alloy for the brush suffers from excessive abrasive wear and unstable electrical transmission. In this study, the powder metallurgy approach combined with appropriate heat treatments was employed to optimize the microstructure and enhance its current-carrying tribological performance. The evolution from microstructure and hardness to tribological and current-carrying behavior was systematically investigated, with a particular focus on the underlying mechanisms. The results show that deformed Cu-rich grains with dense dislocations preferentially form a loose and easily exfoliated nanostructured mixing layer near the worn subsurface compared to the recrystallized Ag-rich grains in cold-rolled AgCu10 alloy. This results in significant delamination and abrasive wear, leading to poor wear resistance and unstable voltage drop behavior in the AgCu10 alloy. The PM-prepared sample aged at 400 °C achieves a favorable balance between enhanced wear resistance and stable current-carrying performance, with a wear rate of 2.42 × 10 -5 mm 3/N·m, a voltage drop of 0.049 V, and an electrical noise of 0.033 V. This improvement primarily stems from the development of a continuous and flat tribo-layer during friction, which arises from the homogenized microstructure featuring moderate-sized recrystallized grains with substructural characteristics, reduced dislocation density, and refined Cu-rich phases. This work provides valuable insights into the wear mechanisms of cold-rolled dual-phase alloys and the development of electrical contact alloys with improved performance.