We report combined scanning tunneling microscopy and electrochemical reactivity measurements on individual palladium nanoparticles supported on a gold surface. It is shown that the catalytic activity towards electrochemical proton reduction is enhanced by more than two orders of magnitude as the diameter of the palladium particles parallel to the support surface decreases from 200 to 6 nm. Density functional theory (DFT) calculations combined with molecular dynamics (MD) simulations have been used to investigate the origin of the effect. It is concluded that the size effect is given by the thickness-variation of the support-induced strain at the surface of the palladium nanoparticles. (C) 2004 Elsevier B.V. All rights reserved.