Single atom catalysts have attracted wide attention due to their high catalytic activity for CO oxidation. We performed density functional theory (DFT) calculations to investigate the various reaction mechanisms of CO oxidation catalyzed by the single Pd atom embedded defect-graphene system as well as the analysis of the structural and electronic properties. It is found that the CO oxidation on Pd-graphene prefers to a new termolecular Eley–Rideal (TER) mechanism rather than the traditional Eley–Rideal (ER) and Langmuir–Hinshelwood (LH) mechanism. In the TER mechanism, the O2 is activated by two adsorbed CO molecules with an energy barrier of 0.08 eV, and the formed OOC-Pd-COO intermediate dissociates into two CO2 molecules synchronously with the energy barrier of 0.29 eV, as the rate-limiting step. Hence, Pd-graphene may serve as the efficient catalysis to CO oxidation. Display omitted