The carbazole moiety is a component of many important pharmaceuticals including anticancer and anti-HIV agents and is commonly utilized in the production of modern polymeric materials with novel photophysical and electronic properties. Simple carbazoles are generally produced via the aromatization of the respective tetrahydrocarbazole (THCZ). In this work, density functional theory calculations are used to model the reaction pathway of tetrahydrocarbazole aromatization over Pd(111). The geometry of each of the intermediate surface species has been determined and how each structure interacts with the metal surface addressed. The reaction energies and barriers of each of the elementary surface reactions have also been calculated, and a detailed analysis of the energetic trends performed. Our calculations have shown that the surface intermediates remain fixed to the surface via the aromatic ring in a manner similar to that of THCZ. Moreover, the aliphatic ring becomes progressively more planer with the dissociation of each subsequent hydrogen atom. Analysis of the reaction energy profile has revealed that the trend in reaction barriers is determined by the two factors: (i) the strength of the dissociating ring-H bond and (ii) the subsequent gain in energy due to the geometric relaxation of the aliphatic ring.