Pd-Fe alloys have attracted attention in PEM fuel cell research because they were found to be comparable to Pt electrocatalysts in oxygen reduction reaction (ORR) kinetics at the cathode. In this study, the surface morphology of a Pd3Fe(111) single-crystal sample and oxygen reaction on the surface were investigated by low energy electron diffraction (LEED), low energy ion scattering (LEIS), x-ray photoelectron spectroscopy (XPS), and scanning tunneling microscopy (STM) under ultra-high vacuum (UHV) conditions. Strong segregation of Pd atoms was observed after annealing in UHV. Particularly, Pd single adatoms and dimers were found on the surface after high temperature annealing, which differs from most other well-studied binary alloy systems. Low free energy of Pd, strain relaxation, and interaction between Pd and Fe, are potentially responsible for the formation of this unusual surface. Adsorption of oxygen reversed the segregation trend and oxidized surface Fe. Ordered surface phases were observed after oxygen exposures at elevated temperatures. The reducing activity of Fe atoms in the alloy inhibited Pd oxidation, and weakened Pd-O interactions on Pd3Fe(111) are consistent with enhanced ORR kinetics.