N2O has been found from experimental and theoretical considerations to bind on-top to the Pd(110) surface in a tilted end-on fashion via its terminal N atom. We use a frontier orbital description of the bonding interactions in the Pd-N2O system to obtain molecular insight into the catalytic mechanism of the activation of N2O by the Pd(110) surface giving rise to the formation of N2 and O on the surface. For the tilted end-on N2O binding mode, the LUMO 3π of N2O has good overlap with the Pd dσ and dπ orbitals which can serve as the electron donors. The donor-acceptor orbital overlap is favorable for electron transfer from Pd to N2O and is expected to dominate the surface reaction pathway of N2O decomposition.