In this theoretical work sequential adsorption of H-2 and O-2 on a Ag (7) (+) cluster surface is first studied and Ag (7) (+) H2O2 cluster co-complex thereby obtained is used for the NO reduction process. This cationic charged silver nano cluster simulates small Ag crystals experimentally detected on gamma-Al2O3 support. For NO reduction, three different mechanisms and intermediate steps of these mechanisms reported in experimental literature are examined. Energy profiles, activation barriers and transition states of the reaction steps involved are studied. Some intermediate steps turned out to have high activation barriers. Hence a combined mechanism selected from the favorable steps found in these three mechanisms is proposed. By using this combined mechanism, reduction of NO to N-2 is achieved.