Glassy Zr70Pd30 as prepared by melt-spinning exhibits "catastrophic" oxidation behavior and deteriorates into powder for example at 240degreesC within a few hours; the scale consists of nanoscale ZrO2 particles as well as large plate-like crystals of as yet unknown structure. TGA reveals an oxidation kinetics by orders of magnitude faster than in comparable Zr-Ni as well as related ternary or quaternary glasses. Detailed cross-sectional TEM combined with Auger depth profiling indicate an internal oxidation process probably as a result of fast oxygen diffusion into the binary glass. Further oxidation depends on the reaction temperature: Whereas oxidation at 180degreesC results in the formation of monoclinic and tetragonal ZrO2 and nanocrystalline Pd, at higher temperatures the amount of tetragonal ZrO2 increases and the Pd will be oxidized into PdO. As in the case of other Zr-based metallic glasses nanocrystallization leads to a significant improvement of the oxidation resistance. The lower free energy of the nanocrystalline alloy as compared to the amorphous precursor material is assumed to be responsible for the improved behavior.