We carried out first-principles spin-polarized calculations in order to provide comprehensive information regarding the structural, electronic and magnetic properties of the PdxZn1–xO (with x = 0.0625) semiconductor. The highly accurate all-electron full-potential linearized augmented plane wave method was used to calculate total energy and electronic structure of the Pd-doped ZnO semiconductor. The recently developed Wu–Cohen generalized gradient approximation to the exchange correlation functional was adopted. The results indicate that the ferromagnetic ground state originates from the strong hybridization between Pd-4d and O-2p states, which is in agreement with previous studies on 4d doping in wide gap semiconductors. This article shows that 4d transition metals such as palladium may also be considered as candidates to explore new half-metallic ferromagnetism in semiconductors. This study gives new clues to the fabrication of diluted magnetic semiconductors.