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A surface reconstructing phenomenon is discovered on a defect‐rich ultrathin Pd nanosheet catalyst for aqueous CO2 electroreduction. The pristine nanosheets with dominant (111) facet sites are transformed into crumpled sheet‐like structures prevalent in electrocatalytically active (100) sites. The reconstruction increases the density of active sites and reduces the CO binding strength on Pd surfaces, remarkably promoting the CO2 reduction to CO. A high CO Faradaic efficiency of 93 % is achieved with a site‐specific activity of 6.6 mA cm−2 at a moderate overpotential of 590 mV on the reconstructed 50 nm Pd nanosheets. Experimental and theoretical studies suggest the CO intermediate as a key factor driving the structural transformation during CO2 reduction. This study highlights the dynamic nature of defective metal nanosheets under reaction conditions and suggests new opportunities in surface engineering of 2D metal nanostructures to tune their electrocatalytic performance. [ABSTRACT FROM AUTHOR]