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CeO₂‐supported noble metal clusters are attractive catalytic materials for several applications. However, their atomic dispersion under oxidizing reaction conditions often leads to catalyst deactivation. In this study, the noble metal cluster formation threshold is rationally adjusted by using a mixed CeO₂‐Al₂O₃ support. The preferential location of Pd on CeO₂ islands leads to a high local surface noble metal concentration and promotes the in situ formation of small Pd clusters at a rather low noble metal loading (0.5 wt %), which are shown to be the active species for CO conversion at low temperatures. As elucidated by complementary in situ/operando techniques, the spatial separation of CeO₂ islands on Al₂O₃ confines the mobility of Pd, preventing the full redispersion or the formation of larger noble metal particles and maintaining a high CO oxidation activity at low temperatures. In a broader perspective, this approach to more efficiently use the noble metal can be transferred to further systems and reactions in heterogeneous catalysis.