The oxidation state of palladium on SiO2-Al2 O-3 used for propane combustion was examined by XPS and XRD, and the correlation of the catalytic activity with the oxidation state of palladium was systematically studied. The propane conversion over 5 wt% Pd/SiO2-Al2O3 was measured in the range I.0 less than or equal to S less than or equal to 7.2 (S is defined as [[O-2]/5[C3H8] based on stoichiometric ratio). The propane conversion strongly depended on the S value and reached the maximum at S=5.5. The oxidation state of palladium also changed with the S value; palladium particles were more oxidized under the reaction mixture of higher S value. On the sample used for the reaction at S=5.5, both of metallic palladium. and palliadium oxide were found. It is concluded that partially oxidized palladium which has optimum ratio of metallic palladium to palladium oxide shows the highest catalytic activity in propane combustion.