The direct synthesis of hydrogen peroxide (H2 + O2 → H2O2) may enable low-cost H2O2 production and reduce environmental impacts of chemical oxidations. Here, we synthesize a series of Pd1Au x nanoparticles (where 0 ≤ x ≤ 220, ∼10 nm) and show that, in pure water solvent, H2O2 selectivity increases with the Au to Pd ratio and approaches 100% for Pd1Au220. Analysis of in situ XAS and ex situ FTIR of adsorbed 12CO and 13CO show that materials with Au to Pd ratios of ∼40 and greater expose only monomeric Pd species during catalysis and that the average distance between Pd monomers increases with further dilution. Ab initio quantum chemical simulations and experimental rate measurements indicate that both H2O2 and H2O form by reduction of a common OOH* intermediate by proton–electron transfer steps mediated by water molecules over Pd and Pd1Au x nanoparticles. Measured apparent activation enthalpies and calculated activation barriers for H2O2 and H2O formation both increase as Pd is diluted by Au, even beyond the complete loss of Pd–Pd coordination. These effects impact H2O formation more significantly, indicating preferential destabilization of transition states that cleave O–O bonds reflected by increasing H2O2 selectivities (19% on Pd; 95% on PdAu220) but with only a 3-fold reduction in H2O2 formation rates. The data imply that the transition states for H2O2 and H2O formation pathways differ in their coordination to the metal surface, and such differences in site requirements require that we consider second coordination shells during the design of bimetallic catalysts.