The interaction of ultrathin Cu films with Pd(lll) was studied by X-ray photoelectron spectroscopy (XPS). The effects of Cu coverage and annealing temperature were investigated. The XPS data show that at room temperature Cu grows on Pd(lll) layer-by-layer without alloying. Furthermore, Cu 2p(3/2) core-level shifts as a function of film thickness indicate that the Cu-Pd interactions perturb the electronic properties of two to three layers of Cu atoms. The Cu 2p(3/2) binding energy of a Cu monolayer at room temperature was shifted by -0.47 eV relative to a Cu(ZOO) surface. XPS core-level shifts demonstrate that by annealing to temperatures higher than 450 K the Cu overlayer alloys with the Pd substrate. After annealing to 900 K, the Cu 2P(3/2) binding energy for 1.0 ML Cu coverage was observed to shift -0.49 eV relative to that of 1 ML Cu/Pd(111). The XPS binding energy shifts are discussed in terms of both initial and final state effects.