Ethylene oxide (EO) interaction with the clean Pd(110) surface was investigated under ultrahigh vacuum conditions using temperature programmed desorption/reaction. Most of the layer adsorbed at 120 K desorbs at 170-220 K, but a fraction decomposes indicating ring opening reactivity. The stoichiometric release of CO and the absence of water formation during EO decomposition on Pd(110) indicated that no more than one C-O bond was broken per molecule; subsequent C-C scission led to methane desorption at similar to 325 K. Using the surface-cluster analogy, we have also applied density functional theory to assess electronic interactions involved in EO interaction with palladium surfaces. In particular, interaction with Pd-n clusters (n=1,4,10) modeling the surface chemistry of EO on palladium surfaces has been investigated in this work. EO binding energies on these clusters range from 8 to 13 kcal/mol. In contrast to the experimental observation of ring opening of EO on Pd(110) and Pd(lll) surfaces, theoretical results at this level do not indicate any significant perturbation of C-O and C-H bonds in adsorbed EO.