A series of Pd/Co3O4 catalysts with increasing palladium loading in the range of 0.5-5 wt.% was prepared by incipient wetness impregnation of Co3O4. Solution combustion synthesis with urea as a fuel was used to optimize the Co3O4 reactive support for palladium in the combustion of methane in lean conditions. The obtained catalysts were thoroughly examined by XRD, XPS, XRF, RS, FESEM, H2-TPR, TGA, and N2-BET techniques. The catalytic tests of CH4 combustion were performed for 0.5, 1, and 2 vol.% CH4, with constant lambda value. The obtained results revealed that a sub-stoichioinetric fuel-to-oxidizer ratio, 0.75, results in the most catalytically active Co3O4 phase. The important differences in the catalysts' activity were apparent for the highest CH4 concentration, with the 3% Pd/Co3O4 being the most active catalyst. The observed activity was explained considering the physicochemical, spectroscopic, and microscopic characterization of the catalysts with the PdO nanocrystals surface distribution being the determining factor for the catalysts' reactivity. A simple model accounting for the observed dispersion effect is proposed. The model is based on a two types of the interaction of the surface PdO active phase with the Co3O4 support. Firstly, cobalt oxide helps to remove hydroxyl species from the PdO surface, thus making the active sites more available for methane activation. Secondly, cobalt spinel provides lattice oxygen to the Pd0 phase, again helping to recreate active sites thereon. (C) 2017 Elsevier B.V. All rights reserved.