Zirconia supported silver catalysts were studied for deep oxidation of methane. The catalyst structure was examined by XRD, XPS, STEM-EDX, HR-TEM and UV-Vis spectroscopy and related to the catalyst activity. Methane conversion strongly depends on Ag state and dispersion. At low Ag loading (<2 at%), small Ag particles (<5 nm) have low activity. The turnover frequency for methane oxidation increases as the Ag particle size increases from 5 to 10 nm as determined from HRTEM, while the activation energy remains the same. Ag ion-exchanged ZSM-5 zeolite materials, containing Ag in highly dispersed state as isolated Ag+ were studied for comparison. High conversion of methane was found only in zeolite catalysts containing a large amount of silver, some of which was in particle form. The reaction rate on zirconia-supported Ag particles is 0.77 order in methane and 0.37 order in oxygen. The reaction products, carbon dioxide and water, do not affect the methane oxidation rate in levels up to of 1.7 and 3.5 mol% in the feedgas, respectively. The active phase under reaction conditions for both low and high Ag loading is the oxygen covered metallic Ag surface, as was confirmed by XPS and UV-Vis spectrometry.