The structure of heterogeneous nanocatalysts supported on metal oxide materials and their morphological changes during oxidation/reduction processes play a crucial role in determining the resulting catalytic activity. Herein, we study the thermal oxidation mechanism of Pd nanoparticles supported on CuO nanowires by combining in situ environmental transmission electron microscopy (TEM), ex situ experiments, and ab initio density functional theory (DFT) calculations. High-resolution TEM imaging assisted by geometric phase analysis enabled the analysis of partially oxidized, fully oxidized, and distinct onion-like Pd nanoparticles with subsurface dislocations. Furthermore, preferential crystalline orientations between PdO nanoparticles and the CuO nanowire support have been found. Hence, the CuO-Pd interface is crucial for the thermal oxidation of Pd nanoparticles, as corroborated by electron energy loss spectroscopy and DFT calculations. The latter revealed a considerably lower energy barrier for penetration of oxygen into the Pd lattice at the CuO-Pd interface, promoting nanoparticle oxidation. The obtained results are compared with those of literature reports on different material systems, and potential implications for catalysis and chemoresistive sensing applications are discussed.