The high specific activity and cost-effectiveness of single-atom catalysts (SACs) hold great promise for numerous catalytic chemistries. In hydrogenation reactions, the mechanisms of critical steps such as hydrogen activation and spillover are far from understood. Here, we employ a combination of scanning tunneling microscopy and density functional theory to demonstrate that on a model SAC comprised of single Pd atoms on Fe3O4(001), H2 dissociates heterolytically between Pd and surface oxygen. The efficient hydrogen spillover allows for continuous hydrogenation to high coverages, which ultimately leads to the lifting of Fe3O4 reconstruction and Pd reduction and destabilization. Water plays an important role in reducing the proton diffusion barrier, thereby facilitating the redistribution of hydroxyls away from Pd. Our study demonstrates a distinct H2 activation mechanism on single Pd atoms and corroborates the importance of charge transport on reducible support away from the active site.