We report first-principles electronic structure calculations of the structural, electronic, and magnetic properties of model epitaxial layers consisting of nickel (Ni) atomic layers deposited on palladium (Pd) substrate, i.e., Ni(001) Pd where and are layer thicknesses. We also investigate the effect of oxygen adsorption on the calculated properties. We found variation in magnetization of between to 1.00 across the nickel layers. Also, finite magnetic moments albeit of small values of between 0.2 and 0.3 is found on the Pd at the interface. This magnetic moment on an otherwise non-magnetic Pd atoms has been adduced to interfacial strain due to lattice mismatch between the Ni and Pd layers at the NiPd interface. The effect of adsorbed oxygen on the Ni Pd is that it increases the magnetic moment on the nickel layers. Also, regarding the magnitude of magnetic anisotropy energy (MAE), we found a high perpendicular values of 1.63 meV and 1.37 meV per unit cell respectively for Ni Pd10 () which are relatively higher than those reported for other transition metal epitaxial layers. However, the presence of oxygen atom on the NiPd changes the direction and magnitude of MAE. Indeed, O adsorption favours or enhances in-plane magnetization direction depending on the thickness of the Ni layers for a fixed Pd thickness. Plots of local density of states (LDOS) which include the effect of spin–orbit coupling (SOC), show that in the case of NiPd having perpendicular MAE, there appears a new SOC-induced electronic states below and above the Fermi level. These states appears to stabilize this type of magnetic anisotropy. On the ot