Adsorption and oxidation of carbon monoxide over a Pd/Al2O3 catalyst layer was investigated both in gas phase and water. Both adsorption and oxidation of CO are significantly affected by the presence of liquid water. Water influences the potential of the metal particles as well as the dipole moment of the adsorbed CO molecule directly, which is reflected both in large red shifts and a higher infrared intensity when experiments are carried out in water. Furthermore, the rate of CO oxidation increases significantly by both the presence of water and by increasing the pH. Enhancement of the oxidation rate is attributed to a weakening of the CO bond by increasing potential of the metal particle, similar to CO oxidation over Pt/Al2O3 as recently published [S. D. Ebbesen et al., J. Catal., 2007, 246, 66]. However, on Pd/Al2O3 the oxidation of palladium is clearly promoted at increasing pH, further enhancing the oxidation of CO over Pd/Al2O3.