The selective hydrogenation of acetylene in the presence of ethylene over Pd catalysts (generally modified with silver) is of critical importance to prevent deactivation of polyethylene polymerization catalysts. In this study, density functional theory has been used to investigate the diffusion of carbon and hydrogen into the subsurface region of Pd(1 1 1), and subsequently, to explore the effects of these subsurface species on the selective acetylene hydrogenation reaction on Pd(1 1 1). In addition, the influence of subsurface Ag on the thermodynamics and kinetics of C2H2 hydrogenation has been examined. We find that the presence of subsurface H lowers the barriers for each C2HX hydrogenation step, and could increase the overall activity of the hydrogenation reaction with a corresponding decrease in the selectivity towards ethylene. In contrast, modification with subsurface C or Ag appears to lead to heightened barriers for ethylene hydrogenation, and may increase the selectivity of the Pd(1 1 1) catalyst. (c) 2011 Elsevier B.V. All rights reserved.