The direct synthesis of hydrogen peroxide from molecular hydrogen and oxygen on a supported palladium catalyst was studied at 258–297 K in a laboratory-scale batch reactor. The catalyst was in the form of finely dispersed slurry in methanol/CO2 to suppress the internal and external mass transfer resistances. Experiments carried out under kinetic control revealed that hydrogen peroxide was successfully formed on the catalyst surface, but it was hydrogenated as the reaction time was prolonged. The mass balances of the components were considered in detail and a reaction mechanism was proposed, based on the competitive adsorption of hydrogen and oxygen on the palladium surface. The surface reactions leading to the formation of hydrogen peroxide and water were assumed to be rate determining, and the rate equations describing direct synthesis, water formation as well as peroxide hydrogenation and decomposition were derived. A special kind of product distribution analysis was used to interpret the kinetic phenomena and to make the estimation of the kinetic parameters very robust. The parameters were estimated by nonlinear regression analysis and the model gave a good fit to the experimental data. The usefulness of the product distribution analysis was clearly demonstrated.