The gas-phase reaction mechanism between palladium monoxide and methane has been theoretically investigated on the singlet and triplet state potential energy surfaces (PESs) at the CCSD(T)/AVTZ//B3LYP/6-311+G(2d, 2p), SDD level. The major reaction channel leads to the products PdCH2 + H2O, whereas the minor channel results in the products Pd + CH3OH, CH2OPd + H2, and PdOH + CH3. The minimum energy reaction pathway for the formation of main products (PdCH2 + H2O), involving one spin inversion, prefers to start at the triplet state PES and afterward proceed along the singlet state PES, where both CH3PdOH and CH3Pd(O)H are the critical intermediates. Furthermore, the rate-determining step is RS-CH3PdOH → RS-2-TS1cb → RS-CH2Pd(H)OH with the rate constant of k = 1.48 × 1012 exp(−93,930/ RT). For the first CH bond cleavage, both the activation strain Δ E≠strain and the stabilizing interaction Δ E≠int affect the activation energy Δ E≠, with Δ E≠int in favor of the direct oxidative insertion. On the other hand, in the PdCH2 + H2O reaction, the main products are Pd + CH3OH, and CH3PdOH is the energetically preferred intermediate. In the CH2OPd + H2 reaction, the main products are Pd + CH3OH with the energetically preferred intermediate H2PdOCH2. In the Pd + CH3OH reaction, the main products are CH2OPd + H2, and H2PdOCH2 is the energetically predominant intermediate. The intermediates, PdCH2, H2PdCO, and t-HPdCHO are energetically preferred in the PdC + H2, PdCO + H2, and H2Pd + CO reactions, respectively. Besides, PdO toward methane activation exhibits higher reaction efficiency than the atom Pd and its first-row congener NiO. © 2011 Wiley Periodicals, Inc. J Comput Chem, 2011 [ABSTRACT FROM AUTHOR]