An alpha-alumina-supported Pd catalyst was studied for the catalytic combustion of methane. Changes in catalyst activity due to variations in the oxygen partial pressure were correlated with corresponding changes in the catalyst oxidation state, particle size, and morphology, At a temperature of 1070 K, the apparent catalyst activity increased with time under the reaction conditions where decomposition of the PdO phase occurs, The formation of large, faceted crystallites of metallic Pd, 200-300 nn in size, was observed by TEM during this process. The increase in activity with increasing particle size is counterintuitive and suggests that metallic Pd surfaces formed under reaction conditions are highly reactive. Since the activation energy for methane oxidation over Pd metal is greater than that over PdO, our results can only be explained by an increase in the pre-exponential factor for this reaction on metal surfaces. To gain insight into the changes in morphology, a model Pd/alpha-alumina catalyst was subjected to similar thermal treatments. It was found that decomposition of PdO leads to the formation of large Pd metal particles. Upon cooling, these Pd particles re-oxidize by the formation of rough polycrystalline PdO particles rather than by the formation of uniform layers of Pd oxide on the Pd metal. Our observations suggest a mechanism to explain the phenomenon of Pd catalyst activation observed in our previous research and by other research groups.