The decomposition of methoxide (CH3O) on a PdZn alloy is considered to be the rate-limiting step of steam re-forming of methanol over a Pd/ZnO catalyst. Our previous density functional (DF) studies (Langmuir 2004, 20, 8068; Phys. Chem. Chem. Phys. 2004, 6, 4499) revealed only a very low propensity of defect-free flat (111) and (100) PdZn surfaces to promote C-H or C-O bond breaking of CH3O. Thus, we applied the same DF periodic slab-model approach to investigate these two routes of CH3O decomposition on PdZn(221) surfaces that expose Pd, (221)(Pd), and Zn, (221)(Zn), steps. C-H bond cleavage of CH3O is greatly facilitated on (221)(Pd): the calculated activation energy is dramatically reduced, to similar to 50 kJ mol(-1) from similar to 90 kJ mol(-1) on flat PdZn surfaces, increasing the rate constant by a factor of 10(8). The lower barrier is mainly due to a weaker interaction of the reactant CH3O and an enhanced interaction of the product CH2O with the substrate. The activation energy for C-O bond scission did not decrease on the (221)(Pd) step. On the (221)(Zn) step, the calculated reaction barriers of both decomposition routes are even higher than on flat surfaces, because of the stronger adsorption of CH3O. Steps (and other defects) appear to be crucial for methanol steam re-forming on Pd/ZnO catalyst; the stepped surface PdZn(221)(Pd) is a realistic model for studying the reactivity of this catalyst.