The influence of Pd on a Co–Pd/γ-Al2O3 heavy oil upgrading catalyst is investigated using different physicochemical and reactive Characterization techniques. Nitrogen adsorption isotherm analysis shows that the specific surface area and porosity of the support alumina is significantly decreased due to the blockage of the pores by the loaded cobalt species. The estimated activation energy of NH3 desorption is found to be less for Co–Pd/γ-Al2O3 sample, which confirms improved acidity due to Pd. TPR experiments show that the reducibility of the catalyst is significantly improved with the presence of Pd. Higher metal dispersion and hydrogen spillover effects are the main reasons for the enhanced reducibility of the Pd promoted catalyst as revealed by the H2-pulse chemisorptions study. When evaluated using VGO as feed stock, the Co–Pd/γ-Al2O3 displayed superiority both in hydrodesulphurisation (HDS) and hydrocracking (HC) activities as compared to the unpromoted Co/γ-Al2O3 catalyst. The coke deposition on the spent catalyst is also found to be low due to the Pd promotional effects. This is an encouraging result, given that higher hydrogenation activity of the catalyst can be achieved without compromising the cracking activity and sustained activity of the catalyst.