Nanocrystalline (4-8 nm) Ce1-xPdxO2-y mixed oxide (0 < x < 0.3), active in low temperature CO oxidation, has been prepared by microemulsion method. Thorough XRD, TEM, SEM-EDS, BET and FT Raman studies revealed that the oxide with x < 0.2 is a homogeneous solid solution structurally stable up to 800 degrees C in oxidizing atmosphere. In hydrogen, already at 500 degrees C segregation of Pd particles occurs, which exhibit preferential Pd (1 1 1)(parallel to)CeO2 (1 1 1) orientation, preserved even after reduction at 800 degrees C. Ce0.89Pd0.11O2-y oxide showed reversible extraction-dissolution of Pd upon successive reduction-oxidation cycles at 500 degrees C, which is an example of "self-regenerative" property important for potential catalytic applications. Doping with Pd strongly hinders the sintering of ceria at high temperatures and enhances its reducibility at low temperatures (below 500 degrees C). "As prepared", oxidized Ce0.89Pd0.11O2-y sample demonstrates moderate activity in CO oxidation (reaching 85% conversion at similar to 250 degrees C) similar to that of 3% Pd/CeO2 prepared by impregnation. The activity improves dramatically (measurable CO conversion below room temperature and 100% conversion at similar to 120 degrees C) after pre-reduction at 400 degrees C in H-2. It appears that partially reduced Pd species, or extremely small particles (<1 nm) at the surface of ceria are responsible for the low temperature activity in CO oxidation. Such Pd species could be strongly bonded to the surface, e.g., exhibiting a special epitaxial orientation observed for larger Pd crystallites (similar to 2 nm) formed during reduction at higher temperatures. (C) 2012 Elsevier B.V. All rights reserved.