Pd nanoparticles (NPs) were prepared by focused femtosecond laser irradiation of PdCl2 dissolved in ethanol. Transmission electron microscopy (TEM) analysis revealed that Pd NPs show certain crystalline microstructure, and the average diameter is 3.4 nm with narrow size distribution from 2.0 to 6.0 nm. The nonlinear optical absorption and refraction of Pd NPs solution were investigated with nanosecond laser pulses at 532 nm. The nonlinear absorption of Pd NPs is saturable at low intensity of 3.28×1011W/m2 but it is changed to reverse saturable with the intensity increased to 7.96×1011W/m2, which accordingly indicates the nonlinear refraction is changed from self-defocusing to self-focusing. The transition of the nonlinear absorption with the increase in pulse intensity is analyzed by an empirical model which includes mostly saturable absorption (SA) and two-photon absorption (TPA). The intensity of saturable Is is obtained, along with TPA coefficient β. SA and TPA are both originated from the interband transition between the d band and s-p conduction band. The SA possess less occupied density of states in the ground state and less unoccupied density of states in the excited state than that of TPA, so the TPA dominates the nonlinear absorption when the pulse intensity is high, leading to as-observed transition from SA to TPA. The refraction variation with increase in pulse intensity is attributed to the interband transition of electrons from d band to s-p conduction band in the Pd NPs.