The oxidation of propylene over a Pd(551) single crystal has been studied in the millibar pressure range using near-ambient pressure X-ray photoelectron spectroscopy and mass spectrometry. It has been shown that, irrespective of the O2/C3H6 molar ratio in the range 1-100, the total oxidation of propylene to CO2 and water and the partial oxidation of propylene to CO and H2 occur when the catalyst is heated above the light-off temperature; increasing the partial pressure of O2 leads to decreasing the catalytic activity. The selectivity toward CO2 is at least two times higher than the selectivity toward CO, indicating that the total oxidation is the main reaction route. The normal hysteresis with a light-off temperature higher than the extinction temperature is observed in the oxidation of propylene between 100 and 300 °C. According to NAP-XPS, the main reason for the hysteresis appearing is a competition between two surface processes: carbonization and oxidation of palladium. At low temperatures, the adsorption and following decomposition of propylene dominate, which results in accumulation of carbonaceous deposits blocking the palladium surface. Increasing the catalyst temperature leads to burning the carbonaceous deposits which initiates the following oxidation of propylene. The highest conversion of propylene is observed when both free surface sites and adsorbed oxygen atoms exist in a large amount on the catalyst surface. As the partial pressure of O2 increases, the catalyst surface gets covered by clusters of surface 2D palladium oxide, which is accompanied by a decrease in the catalytic activity. The mechanism of the oxidation of propylene over palladium is discussed.