Direct synthesis (H2 + O2 → H2O2) is a promising reaction for producing H2O2, which can replace chlorinated oxidants in industrial processes. The mechanism of this reaction and the reasons for the importance of seemingly unrelated factors (e.g., Pd cluster size and solvent pH) remain unclear despite significant research. We propose a mechanism for H2O2 formation on Pd clusters consistent with steady-state H2O2 and H2O formation rates measured as functions of reactant pressures and temperature and the interpretations of proton concentration effects. H2O2 forms by sequential proton-electron transfer to O2 and OOH surface intermediates, whereas H2O forms by O-O bond rupture within OOH surface species. Direct synthesis, therefore, does not proceed by the Langmuir-Hinshelwood mechanism often invoked. Rather, H2O2 forms by heterolytic reaction pathways resembling the two-electron oxygen reduction reaction (ORR); however, the chemical potential of H2 replaces an external electrical potential as the thermodynamic driving force. Activation enthalpies (ΔH(⧧)) for H2O formation increase by 14 kJ mol(-1) when Pd cluster diameters increase from 0.7 to 7 nm because changes in the electronic structure of Pd surface atoms decrease their propensity to cleave O-O bonds. ΔH(⧧) values for H2O2 remain nearly constant because barriers for proton-electron transfer depend weakly on the coordinative saturation of Pd surface atoms. Collectively, these results provide a self-consistent mechanism, which clarifies many studies in which H2O2 rates and selectivities were shown to depend on the concentration of acid/halide additives and Pd cluster size. These findings will guide the rational design of selective catalysts for direct synthesis.