Negative area compressibility (NAC) is a counterintuitive 'squeeze-expand' behavior in solids that is very rare but attractive due to possible pressure-response applications and coupling with rich physicochemical properties. Herein, NAC behavior is reported in palladium diselenide with a large magnitude and wide pressure range. We discover that, apart from the rigid flattening of layers that has been generally recognized, the unexpected giant NAC effect in PdSe 2 largely comes from anomalous elongation of intralayer chemical bonds. Both structural variations are driven by intralayer-to-interlayer charge transfer with enhanced interlayer interactions under pressure. Our work updates the mechanical understanding of this anomaly and establishes a new guideline to explore novel compression-induced properties.