The catalytic oxidation of ethene was studied on Pd(111) in the 10(-7)-10(-6) supercript stopmbar pressure range by a molecular beam TPR hysteresis experiment between 400 K and 1,000 K. Two important effects were identified: the reaction-blocking effect of a dense chemisorbed adlayer of oxygen and the promotional effect of dissolved carbon segregating back to the surface and efficiently reducing the adsorbed oxygen. A strong dependence of the catalytic activity on the oxygen partial pressure is explained by the inhibiting effect of oxygen adsorption; high oxygen pressures in fact extinguish the reaction. The presence of oxygen-free metal surface area, where ethene can dissociate, is necessary for high activity. During heating the highest activity is observed at T similar to 620 K, where a combination of oxygen clean-off by carbon segregating back to the surface is combined with a high ethene adsorption rate, thus forming additional reaction sites and additional reaction products. During heating this carbon-induced clean-off of O(ad) is very efficient because the dissolved C atoms rather accumulate in the surface-near region and largely segregate back to the surface at T > 600 K. In contrast, during cooling from higher temperatures a high surface-near carbon bulk concentration does not build up because the bulk mobility of C atoms is also high and the faster diffusion of C into deeper layers counteracts carbon enrichment in the surface-near metal bulk. This effect favours a higher oxygen surface coverage and a stronger deactivation during cooling. If the carbon loading of the surface-near region was increased by decomposition of clean ethene prior to the reaction experiment, the promotional effect during the heating cycle was strongly enhanced, but the cooling cycle showed no memory of the C presaturation. Generally, the observed hysteresis effects stem from an interplay of combined oxygen site blocking and carbon diffusion effects.