Understanding the migration of species across interfaces in bimetallic systems is key to exploiting their bifunctionality for chemical reactivity and heterogeneous catalysis. The present study demonstrates that the sizes and dispersion of oxidized Pd islands present on oxidized Ag(111) in addition to the concentration of active Pd sites have a significant influence on the rate of surface reduction by H2. Two distinct types of Pd oxide islands were generated for this investigation and characterized using X-ray photoelectron spectroscopy (XPS) and scanning tunneling microscopy. Small, uniformly dispersed PdOx islands (1-5 nm diameter) were created by depositing Pd onto AgOx surfaces, while larger, non-uniformly dispersed PdOx agglomerates (30-50 nm) were produced by depositing Pd on Ag(111) prior to oxidizing. Based on XPS, the small PdOx islands have a higher concentration of undercoordinated Pd atoms than the large agglomerates. Both types of PdOx are found to dramatically enhance the reduction of AgOx by H2 at 300 K due to the ability of PdOx to dissociate H2; the pure AgOx surfaces are unreactive toward H2. The rate of reduction at 300 K is found to be 2-4 times larger for the AgOx surface covered by small, uniformly dispersed PdOx islands. The higher reactivity of this surface is attributed to enhanced migration of oxygen and hydrogen atoms between the PdOx and AgOx phases due to the sizes and high dispersion of the small PdO islands as well as the higher concentration of active Pd sites on the PdOx domains. This study demonstrates that reactant migration between co-existing surface phases is highly sensitive to both the intrinsic chemical activity and morphological properties of the active phase (PdOx) and reveals that these properties can be significantly influenced by the method of synthesizing the oxidized bimetallic surfaces.