We have used spin-polarized density functional theory calculations to investigate the structure of the Pd8Ni92(110) alloy surface, which has been extensively studied for its excellent catalytic properties. Our calculations have corroborated that this alloy has a quite complex (N×1, N~6) structure, so-called “sawtooth” (ST) reconstruction. Moreover, we have accurately computed the metal-metal bond distances and the interlayer spacings. We have also proved that the inclusion of the spin-polarization effects is crucial for a good description of the energetics. Our results agree nicely with those arising from scanning tunneling microscopy and surface x-ray diffraction experiments. In addition, our model brings insights into the driving forces leading to the ST reconstruction.