Novel, solid catalysts of μ3-oxo-bridged Co/Mn cluster complexes, viz., [Co3(O)(CH3COO)6(pyridine)3]+, [Mn3(O) (CH3COO)6(pyridine)3]+, and CoMn2(O)(CH3COO)6(pyridine)3 (denoted Co3(O), Mn3(O), and CoMn2(O), respectively), encapsulated in zeolite-Y oxidize selectively, para-xylene to terephthalic acid with dioxygen. The catalysts were prepared by the “flexible ligand synthesis” method and characterized by X-ray diffraction, thermal analysis, cyclic voltammetry, Fourier transform infrared, diffuse reflectance ultraviolet–visible, X-ray photoelectron spectroscopy, and electron paramagnetic resonance spectroscopic techniques. The various physicochemical measurements confirm the presence and structural integrity of the μ3-oxo-bridged cluster complexes in zeolite cavities. The activity and selectivity of both the “neat” and encapsulated cluster complexes followed the order CoMn2(O)>Mn3(O)>Co3(O), revealing the superiority of the heteronuclear complexes. Under optimal conditions, both neat and encapsulated cluster catalysts exhibit 100% para-xylene conversion with >98% selectivity for terephthalic acid. It is important that the key impurity, 4-carboxybenzaldehyde, is significantly lower in abundance (than the current commercial catalysts) with one of the zeolite-encapsulated catalysts, CoMn2(O)–Y. Leaching of metal ions from the solid catalyst during reaction is minimal and the catalyst could be recycled without significant loss of activity. A more facile redox behavior of Co between +2 and +3 oxidation states in CoMn2(O) (confirmed by cyclic voltammetry) is perhaps responsible for high catalytic activity.