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 PdCH(2) + H(2)O, whereas the minor channel results in the products Pd + CH(3)OH, CH(2)OPd + H(2), and PdOH + CH(3). The minimum energy reaction pathway for the formation of main products (PdCH(2) + H(2)O), involving one spin inversion, prefers to start at the triplet state PES and afterward proceed along the singlet state PES, where both CH(3)PdOH and CH(3)Pd(O)H are the critical intermediates. Furthermore, the rate-determining step is RS-CH(3) PdOH → RS-2-TS1cb → RS-CH(2)Pd(H)OH with the rate constant of k = 1.48 × 10(12) exp(-93,930/RT). For the first C-H bond cleavage, both the activation strain ΔE(≠)(strain) and the stabilizing interaction ΔE(≠)(int) affect the activation energy ΔE(≠), with ΔE(≠)(int) in favor of the direct oxidative insertion. On the other hand, in the PdCH(2) + H(2) O reaction, the main products are Pd + CH(3)OH, and CH(3)PdOH is the energetically preferred intermediate. In the CH(2)OPd + H(2) reaction, the main products are Pd + CH(3)OH with the energetically preferred intermediate H(2)PdOCH(2). In the Pd + CH(3)OH reaction, the main products are CH(2)OPd + H(2), and H(2)PdOCH(2) is the energetically predominant intermediate. The intermediates, PdCH(2), H(2) PdCO, and t-HPdCHO are energetically preferred in the PdC + H(2), PdCO + H(2), and H(2)Pd + CO reactions, respectively. Besides, PdO toward methane activation exhibits higher reaction efficiency than the atom Pd and its first-row congener NiO.