DFT-GGA periodic slab calculations were used to examine the adsorption and hydrogenation of ethylene to a surface ethyl intermediate on the Pd(111) surface. The reaction was examined for two different surface coverages, corresponding to (2 x 3) [low coverage] and (√3 x √3)R 30°[high coverage] unit cells. For the low coverage, the di-σ adsorption of ethylene (-62 kJ/mol) is 32 kJ/mol stronger than the π-adsorption mode. The intrinsic activation barrier for hydrogenation of di-σ bonded ethylene to ethyl, for a (2 x 3) unit cell, was found to be +88 kJ/mol with a reaction energy of +25 kJ/mol. There appeared to be no direct pathway for hydrogenation of π-bonded ethylene to ethyl, for low surface coverages. At higher coverages, however, lateral repulsive interactions between adsorbates destabilize the di-σ adsorption of ethylene to a binding energy of -23 kJ/mol. A favorable surface geometry for the (√3 x √3)R 30°coverage is achieved when ethylene is π- bound and hydrogen is bound to a neighboring bridge site. At high coverage, the hydrogenation of di-σ bound ethylene to ethyl has an intrinsic barrier of +82 kJ/mol and a reaction energy of -5 kJ/mol, which is only slightly reduced from the low coverage case. For a (√3 x √3)R 30°unit cell, however, the more favorable reaction pathway is via hydrogenation of π- bonded ethylene, with an intrinsic barrier of +36 kJ/mol and an energy of reaction of -18 kJ/mol. This pathway is inaccessible at low coverage. This paper illustrates the importance of weakly bound intermediates and surface coverage effects in reaction pathway analysis.