The effect of variations in temperature and oxygen partial pressure on the methane oxidation activity of or-alumina supported Pd catalysts was studied experimentally. It was found that after pretreatment at temperatures above 800 degrees C, conditions where the metallic state of the catalyst is stable, "negative activation" occurred on cooling cycle leading to increase in conversion with decreasing temperature. The pretreatment at temperatures exceeding 800 degrees C was found to be a necessary condition in order for this effect to take place. This phenomenon is attributed to appearance of highly dispersed PdO clusters in thermodynamic equilibrium with the previously formed metallic Pd surface. The contradictory results on the activity of Pd/PdO phase of the catalyst towards methane oxidation reported in the literature are explained by the proposed hypothesis.