The effect of ceria on the catalytic performance of Pd-only three way catalysts prepared by sol-gel method was investigated by XRD, XPS and synthetic exhaust gas reaction with GHSV of 72,000 h(-1). Optimum Ce:Zr mole ratio to stabilize ceria against thermal aging and enhance the catalytic performance was 7:3. It was found that the physical mixing of Pd catalyst, ceria stabilized with zirconium et al. and bulk ceria showed significant improvement in three way catalytic performance and thermal stability. Thermal stability of the catalysts prepared by sol-gel method were more superior than that of the catalysts prepared by impregnation method.