Electrochemical conversion of carbon dioxide (CO2) into high-value chemicals and fuels driven by electricity derived from renewable energy has been recognized as a promising strategy to achieve carbon neutrality and create sustainable energy. Particularly from the viewpoint of the product values and the economic viability, selective CO2 reduction to formic acid/formate has shown great promise. Palladium (Pd) has been demonstrated as the only metal that can produce formic acid/formate perfectly near the equilibrium potential; yet, it still suffers from CO poisoning, poor stability and competitive CO pathway at high overpotentials. Herein, recent progress of Pd-based electrocatalysts for selective CO2 electroreduction and their mechanistic understanding are reviewed. First, the fundamentals of electrochemical CO2 reduction and the reaction pathway of formic acid/formate on Pd are presented. Then, recent advances in the rational design and nanoscale engineering strategies of Pd-based electrocatalysts for further improving CO2 reduction activity and selectivity to formic acid/formate product, including size control, morphology and shape control, alloying, heteroatom doping, surface-strain engineering, and phase control, are discussed from the perspectives of both experimental and computational aspects. Finally, we discuss the pertinent challenges and describe the future prospects and opportunities in terms of the development of electrocatalysts, electrolyzers and characterization techniques in this research field.