•Pd segregation on surface of AuPd bimetallic nanoparticles under CO exposure.•Pd decorates the edges of the AuPd nanoparticles.•DFT calculation, a powerful tool for DRIFTS band assignments. Combined Density Functional Theory (DFT) calculations and Diffuse Reflectance Infrared Fourier Transform Spectroscopy (DRIFTS) were performed to study the distribution of Pd atoms in bimetallic AuPd nanoparticles in the presence of adsorbed CO. Compared to vacuum condition, the results showed evidence of Pd surface enrichment where both Pd monomers and Pd dimers could exist. The energetic stability calculated for several alloy configurations evidenced the preference of Pd to occupy under-coordinated edge sites in the presence of CO gas. Moreover, the calculation of the vibrational frequencies of adsorbed CO for the first time allowed the fine assignment of the complex experimental DRIFTS bands of CO interacting with the bimetallic nanoparticles and their evolution with time exposure. Electronic structure analysis shows preponderant π-back-donation from under-coordinated Pd to CO inducing strong bonding on edge sites.