Sintering and sulfur poisoning are the causes of the deactivation of most catalysts. Herein, the Pd clusters were encapsulated into the all-silica zeolite by one-step synthesis to obtain a core-shell structure (denoted as Pd@S-1) for catalytic combustion of methane with good catalytic activity and high stability. Under the harsh conditions such as 800 degrees C aging for 10 h, 10% water vapor aging for 100 h and 100 ppm SO2 poisoning for 15 h, the Pd particles are prevented from migration and growth due to the confinement of the S-1 shell layer. As comparison, Pd/S-1 and Pd0.8Ni0.2/S-1 sample have different degrees of sintering, resulting in partial deactivation. For Pd0.8Ni0.2@S-1 sample, the introduction of Ni not only enhances the catalytic activity, but also improves the thermal stability. However, the moisture and sulfur resistance of Pd0.8Ni0.2@S-1 catalyst is much lower than that of Pd@S-1 catalyst. A series of characterizations show that the S-1 shell has a shielding effect for SO2. We proposed that the formation of large-sized PdSO4 clusters is prevented due to the confinement effect of S-1 micropore, resulting in SO2 easily desorbed on Pd@S-1 surface, which significantly lowers the temperature of Pd@S-1 catalyst regeneration.