The (2ϫ2) surface-V 2 O 3 layer, an interface-mediated vanadium oxide phase observed on Pd͑111͒ in the submonolayer coverage range, has been investigated by means of angle scanned x-ray photoelectron diffraction ͑XPD͒, which gives a direct experimental confirmation of the model derived by scanning tunnelling microscopy ͑STM͒ and density functional calculations ͑DFT͒, with a quantitative determination of the V-O interlayer spacing. In addition, XPD measurements compared to single scattering cluster-spherical wave ͑SSC-SW͒ simulations revealed a peculiar broadening of V-O forward scattering ͑FS͒ maxima that is limited to azimuthal scans and that cannot be accounted for by isotropic Debye-Waller attenuation of the diffraction features. However, the existence of a soft phonon mode in the overlayer, associated with substantial in-plane displacements from equilibrium of O scatterers with respect to V emitters, could explain the experimental observation. The existence of such a soft mode has been confirmed by DFT calculations. It consists of an in-plane quasirotation around the V emitter of the three nearest-neighbor O atoms, and the estimated DFT frequency amounts to 15 cm Ϫ1 . The XPD data have been analyzed by means of SSC-SW simulations wherein a harmonic oscillator model has been employed to approximate the effect of the soft phonon mode on XPD curves. As a result, an experimental determination of the frequency of the mode has been obtained (40Ϯ25 cm Ϫ1 ), which is of the same order of magnitude as the DFT predicted frequency. Moreover, the sensitivity of XPD scans to the correlation of soft-mode atomic displacements has been studied, leading to the estimate of a ''soft-mode XPD coherence length'' for the system under investigation. This work therefore explores an application of XPD as a surface spectroscopy sensitive to vibrational soft modes.