Metal Hydride systems are an important research topic in material science because of their many practical, industrial, and scientific applications. Therefore, the development of reliable and efficient interatomic potentials for metal hydrides systems, to be utilized in atomistic modeling, can be of great value in accelerating the research in this field. The embedded-atom method (EAM), based on the density functional theory (DFT), has the advantage of being both computationally efficient and being well suited for modeling metal hydride systems. In this work, the author has developed an efficient EAM potential for the palladium hydride (Pd-H) alloy system. Contrary to previously developed Pd-H EAM potentials, that utilized Palladium (Pd) EAM potentials with large sets of fitting parameters, our Pd-H potential utilizes a reliable Pd EAM model with only six fitting parameters. The Pd-H model was fitted to experimental and DFT data, utilizing a constrained optimization procedure. Four octahedral crystal structures: PdH0.25, PdH0.5, PdH0.75, and PdH1.0, two tetrahedral crystals: PdH0.25H0.25 and PdH0.375H0.375, and an fcc hydrogen crystal structure Pd0H were considered during the fitting procedure. The results from both the fitting calculations and the molecular dynamics (MD) simulations showed that our Pd-H potential can also better predict the properties used during the fitting procedure—the cohesive energy, equilibrium lattice constant, the elastic constants, and the bulk modulus, than previously developed Pd-H EAM potentials. The potential also predicted the stable alloy crystal structures and the phase miscibility gap during molecular dynamics simulations. Therefore, the developed Pd-H EAM potential is an improvement compared to those from previous works, and can be used reliably to further study the Pd-H system.