The oxidation of dilute mixtures of CO with dilute oxygen to C0 2 procedes efficiently at moderate temperatures over a catalyst prepared from in-situ activation of amorphous PdZr 2 alloys. The process of activation and the nature of the activated surface are investigated by XPS, UPS, and low pressure reaction experiments. It turned out to be crucial to perform the activation “ in situ” in a special reaction chamber. The simultaneous presence of oxidizing and reducing components in the gas leads to the formation of particles of a solid solution of oxygen in Pd (Pd + O) in intimate contact to an ion conducting phase of zirconia. The interface between the two types of particles is large and influences the chemical stability of the Pd + O. It is preformed in the rapid solidification process which leads to a disc-shaped morphology of the micrograins in the alloy. The arrangement is capable of storing chemically active oxygen. The superior catalytic performance of this system relative to a conventional impregnated Pd/ZrO 2 catalyst is traced back to the intimate contact of the oxygen storage phase, zirconia, with the active phase, Pd + O, which is stabilized against reduction to the pure metal by a constant supply of oxygen ions through the bulk of the supporting matrix and the surface of the particle.