Li promotion is known to greatly enhance the rate of methanol synthesis on Pd. The mechanism of Li promotion of Pd/SiO2 at 483-563 K and 1.8 atm was studied using isotopic transient kinetic analysis (ITKA) with carbon tracing to decouple the effects of Li on the methanol-producing sites during the initial period (at 10 min) of reaction. ITKA results indicate that the concentration of active surface intermediates leading to CH3OH increased upon Li promotion, indicating that the number of active sites increased or that the coverage of active sites by surface intermediates increased. This increase in concentration of active intermediates was not due to any effect of the Li on the Pd dispersion. On the other hand, a measure of the average intrinsic k for methanol formation (k(MeOH)) approximated using the reciprocal of the surface residence time of MeOH intermediates was lower for the Li-promoted than the unpromoted catalyst. Because of the greater importance of the increase in the concentration of surface intermediates, the overall effect was that the Li-promoted catalyst was more active for methanol synthesis.