Dynamics of the CO oxidation NO reduction reaction on thin MgO (100) supported Pd clusters has been studied by quantum chemical molecular dynamics (QCMD). Chemical changes, change of adsorption states, and structural changes were investigated. We observed that CO adsorption occurs molecularly, whereas NO adsorption occurs first molecularly on the Pd cluster, but it is then dissociatively adsorbed on Pd cluster after interacting with CO. Oxygen atoms resulting from the NO dissociation react with adsorbed CO and form CO 2 that desorbs from the Pd cluster, whereas the remaining N atom diffuses in the lattice of the Pd cluster. NO dissociation has been found to be the key step for this reaction. Furthermore, from the molecular dynamics and electronic structure calculations, we have identified a number of consequences for the interpretation and modeling of diffusion experiments demonstrating the coverage. As far we know, this is the first QCMD based simulation of the dynamics of CO oxidation, NO reduction, and CO 2 desorption from the supported Pd cluster.