We investigated dissociative adsorption of H2 molecule on Pd3Ag(111) surface based on the constructed potential energy surfaces (PESs) from the results of first principles calculations. This study is performed to understand H2 dissociative adsorption mechanism on Pd3Ag(111) surface which acts as permeable film for H2 which is a product of biomass gasification. The PES results indicate that when the H2 molecule approaches the Ag atom of the 1st atomic layer, the activation barriers for dissociation start to increase. The dissociation of H2 on the surface has negligible activation barrier when the H 2 center of mass (CM) is directly above the bridge site of Pd atoms while the hydrogen atoms are directed towards the hcp and fcc hollow sites. The average local density of states (LDOS) of the d-orbital of surface Pd atoms show peak in the region around the Fermi level which is not observed from the LDOS of the Ag atom in Pd3Ag(111) surface. This strongly supports the results of the constructed PES for H2 dissociative adsorption mechanism towards Pd3Ag(111) surface. This study will be significant for the design of hydrogen-permeable films which has applications on biomass-operated fuel cells.