Pd/Ga2O3 methanol steam reforming (MSR) catalysts were characterized in detail by utilizing a range of in situ techniques of varying surface sensitivity. Correlating the nature of the intermetallic Pd-Ga compound (IMC; formed upon reduction) with the corresponding activity/selectivity revealed pronounced differences. Generally, a dynamic response of the catalyst surface to the surrounding gas environment was observed. Special attention was paid to the bulk and surface stability of the Pd-Ga IMCs. Whereas the bulk was stable in O2, decomposition of the surface occurred resulting in a partial coverage by GaxOy islands. In addition, we focused on the formation mechanism of undesired CO and were able to identify the reasons limiting the selectivity to MSR. We observed a detrimental effect of CO on the selective Pd-Ga intermetallic compound, causing partial decomposition of the IMC to metallic Pd at the surface. Consequently, patches of Pd metal are present under reaction conditions, catalyzing the unwanted parallel methanol decomposition reaction.