We present ab initio calculations of transport properties of palladium wires in the presence of hydrogen. Detailed investigations have been conducted with a pure palladium wire and with opening a gap inside the wire in which the transition between point contact regime and tunneling regime occurs. The effect of the presence of hydrogen in the gap is studied for different ranges of the gap size. The hydrogen mediated transport in the contact and tunneling regimes of the gap are analyzed and compared. It is predicted that only in large enough distances the hydrogen presence increases the conductance. The effect of additional hydrogen molecules on the gap is also studied.