Solvation effects of liquid water and 1,4-dioxane have been studied from first principles for the hydrodeoxygenation of methyl propionate over a Pd(111) catalyst surface model. Microkinetic reaction models have been developed for various reaction environments to study the effects of solvents on the reaction mechanism. Our models predict that in all reaction environments, decarbonylation pathways are favored over decarboxylation pathways. However, in the presence of liquid water the decarboxylation mechanism is facilitated due to solvent stabilization of the dehydrogenated derivatives of propionate. Overall, the activity of Pd(111) is one order of magnitude lower in water than in 1,4-dioxane where we predict the activity to be very similar to the vapor phase. The decrease in Pd(111) activity due to liquid water can be traced back to the Pd surface being more crowded and propanoyl-methoxy type dissociations becoming more difficult. Propanoyl-methoxy type dissociations also become more rate controlling in liquid water than the dehydrogenation steps that are most rate controlling in 1,4-dioxane and in the vapor phase. (C) 2015 Elsevier Inc. All rights reserved.