The influence of absorbate-adsorbate interaction and island formation on surface reaction kinetics is investigated theoretically for the surface model reaction A + B→ (AB) gas. This study is primarily stimulated by experimental data on oxidation of carbon monoxide on transition noble metals, which indicate island formation. Two kinds of results are presented for different lateral interaction energies: (i) thermal desorption spectra and (ii) decay of surface coverage with time for a fixed temperature. The former show a characteristic double-peak structure for repulsive interaction due to local coverage effects, while the latter reveals a strong variation of the initial slope of coverage versus time, with the type of interaction (attractive or repulsive).