A kinetic study of lean methane combustion on a silica-encapsulated bimetallic Pd-Pt (1:1 molar ratio) catalyst at varying methane concentrations and temperatures and in the absence/presence of added water is presented. With dry feed, the kinetic behavior of the bimetallic catalyst is correlated using a previously reported rate expression that is first order in methane and negative one order in water. The model does not adequately correlate the conversion of wet lean CH4 combustion in the temperature range of 550 to 750 K. For wet conditions, an alternative mechanism is suggested that is based on the previous experimental observations of the prevailing chemical state of Pd in wet feed, the ability of Pt to activate methane in oxygen-deficient atmospheres, and the inhibitory effect of water on the support-mediated oxygen exchange. The corresponding rate expression successfully predicts the activity of the silica-encapsulated Pd-Pt catalyst with wet feed (5 vol % water) in the temperature range of 550 to 750 K. The study also evaluates the internal mass transfer across the silica shell. It is shown that for the catalysts used here, the diffusion resistance across the shell is negligibly small.