To investigate how surface oxygen participates in the reaction of important aromatic oxygenates, the surface chemistry of benzyl alcohol (PhCH2OH) and benzaldehyde (PhCHO) has been studied on oxygen-precovered Pd(111) (O/Pd(111)) using temperature-programmed desorption (TPD) and high-resolution electron energy loss spectroscopy (HREELS). On both Pd(111) and O/Pd(111), TPD using isotopically labeled benzyl alcohol and low-temperature HREEL spectra show that the oxidation of benzyl alcohol proceeds through a benzyl alkoxide (PhCH2O-) intermediate to adsorbed benzaldehyde so that the sequence of bond scission is O-H followed by C-a-H. In the presence of surface O, some benzaldehyde desorbs from the surface below 300 K, consistent with the presence of a weakly adsorbed eta(1) aldehyde state that is bound to the surface through its oxygen lone pair. Benzaldehyde also reacts with surface oxygen to produce benzoate (PhCOO-). Shifts in the OCO stretching frequency suggest that the benzoate orientation changes as the surface becomes less crowded, consistent with a strong interaction between the phenyl group and the surface. Adsorbed benzaldehyde and benzoate undergo decomposition to CO and CO2, respectively, as well as benzene. Deoxygenation of benzyl alcohol to toluene occurs at high coverages of benzyl alcohol when the relative surface O coverage is low. Experiments conducted on O-18/Pd(111) reveal exchange occurring between surface O and the benzaldehyde and benzoate intermediates. This exchange has not been reported for other alcohols, suggesting that aromatic binding effects strongly influence alcohol oxidation on Pd.