There is some dispute as to whether methanol decomposition occurs by O-H bond scission or C-O bond scission. By carrying out density functional theory calculations, we investigate both scenario of the reaction pathways of methanol decomposition on a Pd(111) surface. It is shown that the O-H bond scission pathway is much more energetically favorable than the C-O bond scission pathway. The high reaction barrier in the latter case is found to be due to the poor bonding abilities of CH3 and OH with the surface at the reaction sites.