The effect of the oxygen plasma treatment on the electronic states of multi-wall carbon nanotubes (MWCNTs) is analyzed by X-ray photoemission measurements (XPS) and UPS, both using synchrotron radiation. It is found that the plasma treatment effectively grafts oxygen at the CNT-surface. Thereafter, the interaction between evaporated Pd and pristine or oxygen plasma-treated MWCNTs is investigated. Pd is found to nucleate at defective sites, whether initially present or introduced by oxygen plasma treatment. The plasma treatment induced a uniform dispersion of Pd clusters at the CNT-surface. The absence of additional features in the Pd 3d and C 1s core levels spectra testifies that no Pd-C bond is formed. The shift of the Pd 3d core level towards high-binding energy for the smallest clusters is attributed to the Coulomb energy of the charged final state.