Prompted by the need for a self-supported, chemically stable, and functionally flexible catalytic nanoparticle system, we explore a system involving Pd clusters coated with a monolayer of polyhedral oligomeric silsesquioxane (POSS) cages. With an initial theoretical focus on hydrogen catalysis and sequestration in the Pd-POSS system, we report density functional theory (DFT) results on POSS binding energies to the Pd(110) surface, hydrogen storing ability of POSS, and possible pathways of hydrogen radicals from the catalyst surface to unsaturated bonds away from the surface. (C) 2007 Elsevier B.V. All rights reserved.