CO hydrogenation has been studied over Pd/NaY and Pd/HY catalysts prepared by ion exchange. By controlling the calcination program, Pd/NaY catalysts can be tuned to selectively produce either branched C4+ hydrocarbons or CH3OH and CH3OCH3. On Pd/HY catalysts, C2H6 and C3H8 predominate. Dissociative adsorption of CO over small Pd particles leads to formation of methane and an interstitial PdC0.13 compound, detected by XRD. Reduction with H2 converts PdC0.13 to Pd and methane. During CO hydrogenation catalysis, palladium particles grow, leading to local collapse of the zeolite lattice. Pd migration is also manifest from changes in the Pd/Si ratio detected by XPS. The reaction network reveals bifunctional catalysis: formation of CH3OH on Pd particles is followed by its conversion to CH30CH3 and hydrocarbons over acid sites. Readsorption of hydrocarbons on the Pd particles results in hydrogenation of unsaturated compounds and to changes in the activity, selectivity, and deactivation behavior of the catalysts. © 1992.