Stabilized metal nanoparticles (NPs) have received wide interest in a number of liquid-phase catalytic transformations, but the role of the capping/protective agent is still debated. Operando attenuated total reflection infrared (ATR-IR) spectroscopy enabled us to obtain unprecedented molecular level insights into the selectivity issue induced by the presence of the protective agent by following the liquid-phase benzyl alcohol oxidation on Pd/Al2O3. Supported Pd NPs protected by poly(vinyl alcohol) (PVA) showed a lower rate of benzaldehyde decarbonylation compared to unprotected Pd nanoparticles and, as a result, an improved selectivity toward the aldehyde. In addition, also the further oxidation of benzaldehyde to benzoic acid was reduced by the presence of PVA. In combination with considerations on adsorption site occupancy from CO adsorption, we ascribed this behavior to a selective blocking operated by PVA especially of Pd(111) facets, which are active in the decarbonylation process of benzaldehyde during benzyl alcohol dehydrogenation.