Pd/HZSM-5 catalysts prepared by ion-exchange method using Pd(NH3)(4)(2+) were calcined and reduced at different temperatures to provide different metal dispersions. The effect of Pd dispersion on CO adsorption characteristics and acidity were observed through FT-IR study. Methanol and dimethyl ether were the main products in CO hydrogenation over Pd/HZSM-5 catalyst with small Pd particles on which CO was weakly adsorbed, while the selectivity to methane increased with metal sizes.