Palladinized Nafion(TM) was prepared via ion-exchange and chemical reduction method. Palladium precursors and solvent systems determined the efficiency of the incorporation and distribution of nanoparticles. The tortuous thin Pd film was formed on the surface of membrane when Na+-Nafion(TM) and water were used. Pd nanoparticles enhanced the water uptake of Nafion(TM) and reduced its methanol uptake. And dispersed Pd nanoparticles in Nafion(TM) disturbed the proton conduction and methanol permeation simultaneously in Nafion(TM) cluster. In order to reduce methanol permeation of Nafion(TM) and keep its high conductivity, it was more efficient for Pd nanoparticles to distribute near the surface of membrane. Palladinized Nafion(TM) improved the performance of DMFC single cell operation by reducing the methanol permeation. (C) 2004 Elsevier Ltd. All rights reserved.