Density functional theory calculations are performed to study CO oxidations on pure Pd(1 1 1) surface as well as on its Ni alloy nanostructures. Our calculations demonstrate a dependency of catalytic properties to the Ni occupancy site in the alloys. Furthermore, our results also show that optimal compressive strain (around 5%) of the alloy maybe beneficial to lower the reaction barrier and a compressive strain beyond 7% induces a distortion on the surface that eliminate the adsorption site for the reacting species. Based on our results, we propose that the Pd-Ni alloy with sandwich structure could be a potential candidate identified for lowering the cost of Pd alloys in the catalysis of the CO oxidation reaction. This new structure illustrates a potential lowering in the CO oxidation barrier. Furthermore, our results also indicate that the partial replacement of cheaper Ni into the Pd catalyst should not adversely affect the catalytic property. (C) 2012 Elsevier B.V. All rights reserved.