In a number of hydrogenation reactions, palladium nanoparticles may undergo a transition to the hydride or the carbide phase, which affects the catalytic properties. In the current work, we determine the structural evolution of an industrial Pd/C catalyst in the presence of hydrogen and acetylene by means of in situ X-ray absorption spectroscopy and X-ray powder diffraction. We observe reversible hydride phase formation and irreversible formation of the carbide phase. The near-edge structure of the absorption spectra (XANES) plays the key role in distinguishing between hydride and carbide phases. We show that the presence of hydrogen and carbon atoms have a direct effect on the near-edge region which is reproduced by theoretical simulations performed in the Monte-Carlo approach.