Palladium-modified activated carbon fibers (Pd-ACF) are being evaluated for adsorptive hydrogen storage at near-ambient conditions because of their enhanced hydrogen uptake in comparison to Pd-free ACF. The net uptake enhancement (at room temperature and 2 MPa) is in excess of the amount corresponding to formation of beta-Pd hydride and is usually attributed to hydrogen spillover. In this paper, inelastic neutron scattering was used to investigate the state of hydrogen in Pd-containing activated carbon fibers loaded at 77 K with 2.5 wt % H(2). It was found that new C-H bonds were formed, at the expense of physisorbed H(2), during prolonged in situ exposure to 1.6 MPa hydrogen at 20 degrees C. This finding is a postfacturn proof of the atomic nature of H species formed in presence of a Pd catalyst and of their subsequent spillover and binding to the carbon support. Chemisorption of hydrogen may explain the reduction in hydrogen uptake from first to second adsorption cycle.