The low-palladium Pd/TaN–C catalyst is synthesized by a surfactant-free solvothermal approach and exhibits high activity (2613.18 mA mgPd−1), durability and CO tolerance for MOR (methanol oxidation reaction) in alkaline media, 12.4 folds that of the commercial Pd/C. XPS and electrochemical results indicate that the interfacial Pd–TaNO bond is generated. This also brings the enhancement of OHad adsorption responsible for anti-CO poisoning ability. Density Functional Theory (DFT) calculations indicate that the reaction pathway and the rate-determining step are changed for methanol decomposition to CO on the Pd4/TaN(001) surface compared with Pd (111). The preferred pathway can be described as: CH3OH→CH3O→CH2O→CHO→CO. Furthermore, the results indicate that the adsorption of OH is enhanced and the energy barrier of COOH formation from CO + OH is reduced with the high concentration of hydroxyl on the Pd4/TaN(001) surface, further confirming the bi-functional effect of hydroxyl on the CO tolerance.