The origin of surface core-level shift (SCLS) of Pd thin films on Pt (111) substrate is investigated. At submonolayer coverage of Pd thin films, the splitting of Pd 3d core-level peaks indicate the contribution of both initial and final states of photoionization processes while no change on valence band (VB) spectra is found. When the coverage of Pd reaches to single monolayer, the final-state relaxation effect on the Pd 3d vanishes and only the initial-state effect, a negative SCLS, is present. Also, the VB spectrum at Pd monolayer films shows a clear band narrowing, that is, the origin of the negative SCLS at monolayer coverage. As the Pd coverage is increased to more than monolayer thickness, the Pd 3d peaks start to show the surface layer contribution from second and third layers and the VB spectra show even narrower bandwidth, possibly due to the formation of surface states and strained effect of Pd adlayers on top of the first pseudomorphic layer.