A periodic density functional theory (DFT) calculation has been used to study the NO reduction by H2 on the stepped Pd(211) surface. The main route of N2 generation changes with temperature increasing. The dimer path is main for the formation of N2 at low temperature, in which two NO react and generate N2O2, and then N2O2 decompose to produce N2. However, the active N path becomes main to generate N2 via NO hydrogenate and dissociate to produce active N at high temperature. The formation of NH3 is via the successive hydrogenation of N or NH. Additionally, energy barriers showed that the Pd(211) surface exhibited higher catalytic activity to the reduction of NO by H2 than that on the Pd(111) surface, and the kinetics showed that the selectivity of N2 is higher than that of NH3 on the stepped Pd(211) surface below about 500 K.