Supported Pd clusters catalyze methanol oxidation to methyl formate with high turnover rates and >90% selectivity at near ambient temperatures (313 K). Metal clusters are much more reactive than PdO clusters and rates are inhibited by the reactant O₂. These data suggest that ensembles of Pd metal atoms on surfaces nearly saturated with chemisorbed oxygen are required for kinetically-relevant C–H bond activation in chemisorbed methoxide intermediates. Pd metal surfaces become more reactive with increasing metal particle size. The higher coordination of surface atoms on larger clusters leads to more weakly-bound chemisorbed species and to a larger number of Pd metal ensembles available during steady-state catalysis. Chemisorbed oxygen removes H-atoms formed in C–H bond activation steps and inhibits methoxide decomposition and CO₂ formation, two functions essential for the high turnover rates and methyl formate selectivities reported here.