Ethanol is one of the most important industrial chemicals considering its wide range of uses. From ultrahigh vacuum (UHV) experiments, we were able to effectively produce acetaldehyde and ethyl acetate on a Pd–Au model catalyst. The presence of oxygen at the Pd–Au interface sites was found to be highly reactive for ethanol dehydrogenation, significantly increasing acetaldehyde production and promoting cross-esterification to produce ethyl acetate. Density functional theory calculations show that compared to the bare PdAu(111) surface, the presence of preadsorbed oxygen and the subsequently formed hydroxyl group leads to highly active and selective initial ethanol dehydrogenation at the O–H and α–C-H position, which was corroborated by isotope-labeling experiments. Specifically, using temperature-programmed desorption with the isotope CD3CH2OH, we identified C–C bond breakage through methane production. Furthermore, the simultaneous desorption of D2 with ethyl acetate from the oxidation of CD3CD2OD suggests that the abstraction of hydrogen from acetaldehyde and/or ethanol is a relevant step in ethyl acetate production, which is supported by our theoretical predictions. These results shed light on the mechanistic pathways of having oxygen and ethanol coadsorbed on Pd–Au surfaces, which has significant implications for industrial applications such as fuel cells where catalytic design plays a major role in the efficiency of power production.