The possible geometrical and electronic structures of small Pd-Y clusters including Pd n (n=2,3,4),Y n (n=2,3,4), PdY n (n=2,3, 4), Pd n Y(n=1,2,3,4) and Pd 2 Y n (n=2,3,4) have been optimized by density functional theory method with a relativistic effective core potentia l(RECP) using Gaussian 98 code. Due to the Jahn-Teller effect, the ground states of Pd 4 and Y 4 belong to C s , while the symmetry is C 2v for P d 3 and Y 3 . The ground states of Pd 3 Y, Pd 4 Y, PdY 3 ,PdY 4 and Pd 2 Y 4 b elong to C s . Finally, the energy level distribution, highest occupied mole cular orbit-lowest unoccupied molecular orbit gaps and the chemical activation a re investigated.