We report on the synthesis and testing of active and stable nano-catalysts for methane oxidation. The nano-catalyst was palladium/ceria supported on alumina prepared via a one-step solution-combustion synthesis (SCS) method. As confirmed by X-ray photoelectron spectroscopy (XPS) and high-resolution transmission electron microscopy (HTEM), SCS preparative methodology resulted in segregating both Pd and Ce on the surface of the Al₂O₃ support. Furthermore, HTEM showed that bigger Pd particles (5 nm and more) were surrounded by CeO₂, resembling a core shell structure, while smaller Pd particles (1 nm and less) were not associated with CeO₂. The intimate Pd-CeO₂ attachment resulted in insertion of Pd ions into the ceria lattice, and associated with the reduction of Ce⁴⁺ into Ce³⁺ ions; consequently, the formation of oxygen vacancies. XPS showed also that Pd had three oxidation states corresponding to Pd⁰, Pd²⁺ due to PdO, and highly ionized Pd ions (Pd^(2+x)+) which might originate from the insertion of Pd ions into the ceria lattice. The formation of intrinsic Ce³⁺ ions, highly ionized (Pd²⁺ species inserted into the lattice of CeO₂) Pd ions (Pd^(2+x)+) and oxygen vacancies is suggested to play a major role in the unique catalytic activity. The results indicated that the Pd-SCS nano-catalysts were exceptionally more active and stable than conventional catalysts. Under similar reaction conditions, the methane combustion rate over the SCS catalyst was ~18 times greater than that of conventional catalysts. Full methane conversions over the SCS catalysts occurred at around 400 °C but were not shown at all with conventional catalysts. In addition, contrary to the conventional catalysts, the SCS catalysts exhibited superior activity with no sign of deactivation in the temperature range between ~400 and 800 °C.