Water gas shift (WGS) reaction is a key industrial process to produce hydrogen from CO and H2O. However, conventional Cu-based WGS catalysts are easily deactivated by sulfur compounds, which are ubiquitous in syngas. Cu-Pd nanoparticles of size 8-10 nm were synthesized as a function of the Cu/Pd ratios and investigated as promising sulfur-tolerant WGS catalysts. Significant improvement in the WGS activity was observed in the Cu-Pd catalysts after calcination at 800 degrees C in air. Pd addition enhanced the reducibility of CuO and Cu-0 dispersion and limited the formation of CuAl2O4 spinel during calcination at 800 degrees C. The additional reducible and catalytically active CuO species was generated by the Cu migration from the CuO shell covering the Cu-Pd nanoparticles onto the gamma-Al2O3 support during the 800 degrees C calcination. The optimal Cu-Pd catalyst characterized by the CuO/CuAl2O4 ratio of 2.37 showed the highest WGS activity, thermal stability, and sulfur tolerance among all Cu-based catalysts reported in this study.