Pd colloids stabilized with polyvinyl alcohol (PVA) and polyvinylpyrrolidone (PVP) have been prepared, characterized with TEM, zeta potential measurements, CO chemisorption in aqueous phase, and ATR-IR spectroscopy using CO as a probe molecule, and finally tested for performance in nitrite hydrogenation as unsupported nanoparticles. Polymer coverage on Pd surface was significant for both Pd-PVA and Pd-PVP colloid, blocking active sites. The turnover frequency (TOF) of the remaining sites as well as selectivity to ammonium was not influenced by coverage of the Pd surface with PVA. However, the ammonium selectivity increased with increasing Pd particle size. In contrast, increasing coverage of Pd surface with PVP increased the TOF, while the ammonium formation was suppressed. This has been attributed to an effect of PVP on the surface reaction intermediates, based on the observation that chemisorbed CO was also influenced by PVP.