The Horiuti-Polanyi mechanism for ethylene hydrogenation over Pd(111) is examined using first-principle density functional quantum chemical calculations. Cluster and periodic slab DFT-GGA calculations were carried out to determine the modes and energies of chemisorption for a sequence of proposed intermediates, along with overall reaction energies and activation barriers for each of the speculated elementary steps. The DFT-calculated binding energies for ethylene (π), ethylene (di-σ), ethyl, vinyl, ethylidyne, atomic oxygen, and atomic carbon on the Pdl9 cluster (and the Pd(111) slab) were found to be -30 (-27), -60 (-62), -130 (-140), -237 (-254), -620 (-636), -375 (-400), and -610 (-635) kJ/mol. The slab results were found to be within 20 kJ/mol of the cluster results. Frequency calculations along with predicted chemisorption energies indicate that ethylene adsorbs in both π- and di-σ-configurations. At moderate temperatures, the binding energies for π- and di-σ-bound ethylene are comparable. At low surface coverages, the predicted intrinsic activation barriers are +72 kJ/mol for the hydrogenation of ethlyene to surface ethyl and +71 kJ/mol for ethyl to ethane. The corresponding overall reaction energies for these two steps are +3 and -5 (without lateral interactions) kJ/mol, respectively. At low surface coverages, the di-σ-intermediate appears to be the precursor to reaction. At low coverage the π-bound intermediate is first converted to the di-σ-species before it will react with hydrogen. The apparent activation barrier for ethylene hydrogenation to surface ethyl is 26 kJ/mol which is significantly lower than the intrinsic activation barrier. The apparent barrier is measured with respect to the gas-phase rather than the adsorbed ethylene state. Higher surface coverages alter the favored reaction state. At higher coverages, the activation barriers for ethylene hydrogenation to surface ethyl were calculated to be +82 and +36 kJ/mol for the di-σ- and π-bound intermediates, respectively. Higher surface coverages weaken both the metal-hydrogen and metal-carbon bonds. This promotes hydrogenation from the π-bound state. The calculated barrier of +36 kJ/mol (from the π-bound state) at higher surface coverages is consistent with experimentally reported ethylene hydrogenation barriers.