We perform systematic density functional studies to elucidate the mechanism of vinyl acetate (VA) synthesis on Pd/Au(001). Atomic geometries, activation energies, and reaction energies are determined for three separate reaction stages: coupling of ethylene and acetate; β-H elimination; and VA desorption. Significantly, we find that the Pd “monomer” pair is much more robust in all three reaction stages than large Pd ensembles such as Pd monolayers, mainly due to high mobility of reactants on surrounding Au sites. The remarkably high activity and selectivity of VA reaction on PdAu bimetallic surfaces observed by Goodman et al. are exclusively attributed to the ensemble effects.