We study particle production and the corresponding entropy increase in the context of cosmology with dynamical vacuum. We focus on the particular form that has been called running vacuum model (RVM), which is known to furnish a successful description of the overall current observations at a competitive level with the concordance $Lambda$CDM model. It also provides an elegant global explanation of the cosmic history from a non-singular initial state in the very early universe up to our days and further into the final de Sitter era. The model has no horizon problem and provides an alternative explanation for the early inflation and its graceful exit, as well as a powerful mechanism for generating the large entropy of the current universe. The energy-momentum tensor of matter is generally non-conserved in such context owing to particle creation or annihilation. We analyze general thermodynamical aspects of particle and entropy production in the RVM. We first study the entropy of particles in the comoving volume during the early universe and late universe. Then, in order to obtain a more physical interpretation, we pay attention to the entropy contribution from the cosmological apparent horizon, its interior and its surface. On combining the inner volume entropy with the entropy on the horizon, we elucidate with detailed calculations whether the evolution of the entropy of the RVM universe satisfies the Generalized Second Law of Thermodynamics. We find it is so and we prove that the essential reason for it is the existence of a positive cosmological constant.
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