Abstract Thin layers of U on polycrystalline Pd have been prepared by magnetron sputter deposition at room temperature. Mode of growth, annealing induced surface rearrangement, bulk diffusion and the electronic structure of the surface have been investigated by AES, XPS and UPS. It was shown that for U coverages well below one monolayer the decreased coordination at the surface produces localization of the 5f electrons in U. At low dosages U stays on the top surface, while at higher coverages near-surface diffusion takes place, even at room temperature. Strong chemical interaction between deposited U and Pd was detected by the surface core level shifts of the Pd 3d line and by the evolution of the Pd valence band. At dosages above one monolayer, the U 5f electrons are clearly delocalized. Annealing triggers diffusion of U into Pd. Two types of diffusion were observed: one at temperatures below 250°C which results in U-Pd surface compound formation and one at temperatures above 500°C which is associated with bulk diffusion of U. Low temperature diffusion is thought to result in non-stoichiometric UPd 3.