The important central question related to origin of ferromagnetic properties in the non-magnetic materials at nano-dimensions has been investigated by a novel approach of studying the evolution of magnetic properties by intentionally creating defects. The ferromagnetic response of Pd is found to increase by 20 times for nanoparticle (NP) dispersed in carbon matrix and increase by about 3.5 times in case of Pd nanoparticles dispersed in SiO2 matrix on exposure to swift heavy ion irradiation. Ferromagnetic response is found to increase by about 9.3 times on subjecting the Pd nanoparticles to hydrogen loading-deloading cycle. Ferromagnetic properties of Pd nanoparticles dispersed in carbon and SiO2 matrices, despite having same size and concentration, are observed to be vastly different due to matrix effect. These changes in ferromagnetic properties are correlated to the change in the electronic structure due to matrix, nanoparticle size, and creation of defects in the nanoparticle core and at NP-matrix interface during post deposition treatments. Giant enhancement in the magnetic properties and change in electronic properties point toward a core and surface magnetic structure in metal nanoparticle. (C) 2012 American Institute of Physics.