Conversion of biomass into fuels or chemicals often requires a processing step limited by hydrodeoxygenation of organic acids. Various pathways have been proposed for the deoxygenation of these acids into hydrocarbons, with the decarboxylation and decarbonylation requiring less hydrogen than the reductive deoxygenation without C–C bond cleavage. In this paper, we present the reaction mechanism for the decarboxylation and decarbonylation of propanoic acid over Pd(111) model surfaces determined by first-principles electronic structure calculations based on density functional theory. Our calculations suggest that the most significant decarbonylation pathways proceed via a dehydroxylation of the acid to produce propanoyl (CH3CH2CO) followed by either full α-carbon dehydrogenation and CH3C–CO bond scission to produce CH3C and CO, or first α-carbon dehydrogenation followed by β-carbon dehydrogenation and CH2CH–CO bond scission to produce CH2CH and CO. The decarboxylation mechanism starts with O–H bond cleavage followed by direct C–CO2 bond scission or possibly α-carbon dehydrogenation prior to C–CO2 bond cleavage. As a result, in both mechanisms the most favorable pathways likely involve some level of α- and/or β-carbon dehydrogenation steps prior to C–C scission, which distinguishes these deoxygenation pathways from the reductive deoxygenation without C–C bond cleavage that has previously been shown to not involve dehydrogenation steps.