We investigate reversible and irreversible thermodynamic processes in cosmology and their impact on the Hubble tension through modifications to early and late-time expansion history. Gravitationally induced adiabatic matter creation/annihilation are treated as irreversible processes, while energy exchange between the cosmic bulk and horizon is modeled as reversible. We propose two thermodynamically interacting scenarios: Model I considers matter creation/annihilation across all species with energy transfer to effective entropic dark energy, while model II focuses on dark matter creation/annihilation with energy flow from baryonic matter and radiation. Both incorporate the generalized first law of thermodynamics with matter creation/annihilation governed by $\mathrm{\Gamma }(t)={\mathrm{\Gamma }}_{0}H$ and energy transfer quantified by parameter $\gamma$. We perform observational analysis using $\mathrm{Pantheon}+$, cosmic microwave background distance priors, baryon acoustic oscillations, gamma-ray bursts, cosmic chronometers, with and without SH0ES measurements. When SH0ES data are included, matter annihilation scenarios (${\mathrm{\Gamma }}_0<0$) become statistically preferred, yielding $H_0=71.75\pm 0.79\mathrm{km}{\mathrm{s}}^{-1}{\mathrm{Mpc}}^{-1}$ (model I) and $H_0=71.06\pm 0.81\mathrm{km}{\mathrm{s}}^{-1}{\mathrm{Mpc}}^{-1}$ (model II), achieving $1.2\sigma$ and $1.8\sigma$ agreement with the SH0ES measurement of $H_0=73.17\pm 0.86\mathrm{km}{\mathrm{s}}^{-1}{\mathrm{Mpc}}^{-1}$. Matter creation (${\mathrm{\Gamma }}_0>0$) or pure energy flow [$\mathrm{\Gamma }(t)=0$] scenarios show no such improvement. However, without SH0ES data, information criteria show no preference for the thermodynamically interacting models over $\mathrm{\Lambda }\mathrm{CDM}$, indicating the models’ performance depends critically on local distance ladder calibration. For matter annihilation scenarios with energy flow, effective entropic dark energy exhibits dynamical evolution, mimicking radiation and matter before recombination, then transitioning through quintessence toward the cosmological constant today. These results demonstrate that thermodynamically motivated interactions provide a theoretically consistent framework that accommodates tension alleviation when calibrated with SH0ES measurements, while highlighting the broader challenge of reconciling early-universe and local observational constraints.

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• Cosmological parameters
• Dark energy
• Evolution of the Universe
• Gravitation