The formation of Pd dimers on the surface of MgO has been studied by means of density functional theory (DFT) cluster model calculations. The following surface sites have been considered: regular five-coordinated anions at the (1 0 0) terraces, monoatomic steps, OH groups, and neutral vacancies (F centers). We discuss the energy balance of forming a dimer at a given site with respect to two isolated Pd atoms, one adsorbed at the defect and one on a regular terrace site. We found that all the defects considered lead to an energy gain when the dimer is formed, suggesting that they can be involved in nucleation and growth processes of metal clusters on the MgO surface. The dimerization energy is moderate for steps (≈0.8 eV), large for OH groups (≈1.3 eV) and rather small (<0.5 eV) for F centers.