The sensitivity and selectivity of SnO2 based gas sensors could be improved by doping of small amount of transition metals. In this work we used X-ray photoelectron spectroscopy, ion scattering spectroscopy, and thermal desorption techniques to investigate Pd evaporated on SnOx thin layer substrate, prepared by spray pyrolysis. The evolution of Pd/SnOx layer morphology with increasing amount of Pd deposits was studied using the XPS inelastic background shape analysis. The observations are compared to the results obtained from natural SnO2 crystal and metallic Sn substrates. A strong Pd-Sn bimetallic interaction was observed. resulting in the formation of PdSn alloy of noble metal-like electronic structure. This feature also corresponds to the presence of two CO desorption states with low energy peaks at approximately 390 K. The relation of our results with the operation mechanism of gas detection are discussed.