The vibrational excitations and the position of hydrogen in nanocrystalline palladium were investigated by means of inelastic neutron-scattering and H solubility measurements. The study focuses on the H concentration regime (<or=4.8 at.% H) where, at room temperature, no precipitation of the H in a hydride phase ( beta -phase) was observed. In this concentration regime, the solubility measurements show an enhanced H solubility relative to coarse-grained Pd. The neutron-scattering experiments show that this additional H is incorporated in the grain boundaries and at the surface of the grains. Surface modes of H at approximately 90 and 120 meV were identified. Compared to coarse-grained Pd, no change in the H solubility was found for the crystal lattice of the nanosized grains.