The role of artificially created defects and steps in the local reaction kinetics of CO oxidation on the individual domains of a polycrystalline Pd foil was studied by photoemission electron microscopy (PEEM), mass spectroscopy (MS), and scanning tunneling microscopy (STM). The defects and steps were created by STM-controlled Ar+ sputtering and the novel PEEM-based approach allowed the simultaneous determination of local kinetic phase transitions on differently oriented μm-sized grains of a polycrystalline sample. The independent (single-crystal-like) reaction behavior of the individual Pd(hkl) domains in the 10-5 mbar pressure range changes upon Ar+ sputtering to a correlated reaction behavior, and the reaction fronts propagate unhindered across the grain boundaries. The defect-rich surface shows also a significantly higher CO tolerance as reflected by the shift of both the global (MS-measured) and the local (PEEM-measured) kinetic diagrams toward higher CO pressure.