Palladium (Pd) nanocrystals have been synthesized by using formic acid as the reducing agent at room temperature. When the concentration of formic acid was increased continuously, the size of Pd nanocrystals first decreased to a minimum and then increased slightly again. The products have been investigated by a series of techniques, including X-ray diffraction, high-resolution transmission electron microscopy (HRTEM), UV-vis absorption, and electrochemical measurements. The formation of Pd nanocrystals is proposed to be closely related to the dynamical imbalance of the growth and dissolution rate of Pd nanocrystals associated with the adsorption of formate ions onto the surface of the intermediates. It is found that small Pd nanocrystals showed blue-shifted adsorption peaks compared with large ones. Pd nanocrystals with the smallest size display the highest electrocatalytic activity for the electrooxidation of formic acid and ethanol on the basis of cyclic voltammetry and chronoamperometric data. It is suggested that both the electrochemical active surface area and the small size effect are the key roles in determining the electrocatalytic performances of Pd nanocrystals. A "dissolution-deposition-aggregation" process is proposed to explain the variation of the electrocatalytic activity during the electrocatalysis according to the HRTEM characterization.