Titanium oxide species anchored in the Y-zeolite cavities by an ion-exchange method exhibits a high and unique photocatalytic reactivity for the direct decomposition of NO into N-2, O-2, and N2O at 275 K with a high selectivity for the formation of N-2. The in situ photoluminescence and XAFS (XANES and FT-EXAFS) investigations indicate that the titanium oxide species are highly dispersed in the zeolite cavities and exist in a tetrahedral coordination. The charge-transfer excited state of the titanium oxide species plays a significant role in the direct decomposition of NO with a high selectivity for the formation of N-2, while the catalysts involving the aggregated octahedrally coordinated titanium oxide species show a high selectivity to produce N2O, being similar to reactions on the powdered TiO2 catalysts.