The kinetics of methane combustion at low temperatures are consistent with a Mars-van Krevelen redox mechanism involving the activation of methane on site pairs consisting of oxygen atoms and oxygen vacancies on the surface of PdOx crystallites. H2O strongly inhibits methane oxidation rates by titrating surface vacancies in a quasi-equilibrated adsorption-desorption step. Initial activation periods during methane oxidation are related to the presence of oxygen-deficient PdOx crystallites, which contain stronger Pd-O oxygen bonds and increase their oxygen content during steady-state combustion reactions. Strong Pd-O bonds in small crystallites and in oxygen-deficient PdOx also lead to the observed decrease in methane oxidation turnover rates as crystallite size decreases or as samples are treated at temperatures above those required for PdO-to-Pd decomposition.