We studied the cyclotrimerization of acetylene on size-selected Pd, clusters (1 less than or equal to n less than or equal to 30) supported on thin MgO(100) films by thermal desorption and Fourier transform infrared spectroscopy. Surprisingly, the production of benzene is already observed on a single palladium atom at low temperature (300 K). Using density functional theory (DFT) calculations we show that free inert Pd atoms are activated by charge transfer from defect sites of the MgO substrate upon deposition. For larger clusters (7 less than or equal to n less than or equal to 30) benzene is additionally produced at a temperature of 430 K and our results suggest the existence of a critical ensemble of seven palladium atoms for this high-temperature reaction mechanism.