Ceria-supported Pd nanoparticles are known to be efficient catalysts for vehicle exhaust purification, especially diesel oxidation. The exhaust often undergoes harsh conditions, suffering from high temperature up to similar to 750 degrees C. These conditions cause Pd nanoparticles to sinter, losing the catalytic active sites. In addition, carbonate and sulfate species might be formed on the catalyst surface, blocking the active sites with degraded activity. Hydrothermal treatment on Pd/CeO2 affects the catalyst structure, resulting in enhanced catalytic activity and durability for CO oxidation. CO conversion approached 100% at temperatures lower than 150 degrees C even in the presence of propylene or SO2. The high activity for CO conversion changed little for longer reaction times and even for temperature fluctuations up to 850 degrees C. A promoting effect was obtained due to Pd redispersion and surface hydroxyl groups formed after the hydrothermal treatment. The redispersion was confirmed by TEM, EXAFS, XRD, in situ DRIFT, and CO chemisorption, and the suppression of surface-poisoning species was investigated using in situ DRIFT and TPD techniques.