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 fur two different surface coverages, corresponding to (2x3) [low coverage] and (root 3 x root 3)R 30 degrees [high coverage] unit cells. For the low coverage, the di-sigma adsorption of ethylene (-62 kJ/mol) is 32 kJ/mol stronger than the rr-adsorption mode. The intrinsic activation barrier for hydrogenation of di-sigma bonded ethylene to ethyl, for a (2x3) 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 pi-bonded ethylene to ethyl, fur low surface coverages. At higher coverages, however, lateral repulsive interactions between adsorbates destabilize the di-a adsorption of ethylene to a binding energy of -23 kJ/mol. A favorable surface geometry for the (root 3x root 3)R 30 degrees coverage;is achieved when ethylene is It-bound and hydrogen is bound to a neighboring bridge site, Al high coverage, the hydrogenation of di-sigma 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 (root 3x root 3)R 30 degrees unit cell, however, the more favorable reaction pathway is via hydrogenation of pi-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.