In this study, the effect of swift heavy ion irradiation on the magnetic properties of the Pd nanoparticles has been investigated. Structural investigations along with superconducting quantum interface device measurements show that ferromagnetic properties of the Pd nanoparticles are due to the deviation of their electronic structure from that of bulk. The electronic structure is further modified due to the creation of defects on ion irradiation, which results in 20 times increase in the saturation magnetization. The present study establishes that the defect induced modification of Pd 4d electronic structure is responsible for the ferromagnetic properties of the Pd nanoparticles.