Native palladium is rare and occurs in oxidizing environments (hematite stability field) and consistently has very low contents of other metals. On the other hand, gold may contain significant amounts of alloyed palladium. A nugget of palladian gold, obtained from a specularite-rich auriferous vein (‘jacutinga’) of the Gongo Soco iron ore mine, Quadrilátero Ferrífero, Minas Gerais, allows the definition of a paragenetic sequence of native palladium formation. The cm-sized nugget is brecciated and consists of fragments of palladian gold [Au0.79Pd0.09Cu0.07Ag0.04Hg0.01] with inclusions of isomertieite [Pd11Sb2As2], cemented by kaolinite-hematite-palladian gold infill. The isomertieite inclusions are preferentially fractured and display various degrees of alteration to a Pd-O phase. Native palladium occurs as a crystallized component within the Pd-O phase, with microstructural and chemical features suggesting a desiccation process. It is proposed that native palladium forms by (1) oxidation of a pre-existent palladium mineral to a Pd-O phase, and (2) subsequent crystallization of native palladium from the Pd-O phase, by oxygen loss and dehydration. This process operates in a low-temperature hydrothermal or weathering environment and leads to strong fractionation of palladium and gold.