Cobalt-exchanged zeolite samples were characterized using XRD, XPS, TEM, and UV-vis spectroscopy. Co-ZSM-5 of varying exchange degree was prepared by ion-exchange of H-ZSM-5 with cobalt acetate. Three different species were observed: (i) Co2+ cations located at alpha and beta sites in the zeolite channels, (ii) microaggregates composed of cobalt and oxygen, and (iii) cobalt oxide particles of type CoO and CO3O4, including cobalt silicate for overexchanged samples. The formation of microaggregates proceeded through clustering of hydrated Co2+ cations located at alpha sites. Their size indicates that they are located at the intersection of the zeolite channels. Further clustering of those microaggregates in the presence of water led to the formation of cobalt oxide particles located at defect sites or at the outer surface of the zeolite grains. The microaggregates were found to be active species in the reduction of NO to N-2 using methane as the reducing agent. Larger outer oxide/silicate species were involved mainly in unselective parallel combustion reactions. In contrast, the isolated cobalt cations acted predominantly as adsorption sites for NO. Aging experiments in the presence of water and sulfur dioxide demonstrated a decline in activity by ca. 20% before a constant conversion was reached. The irreversible deactivation can be explained by a weakening of the interaction between cobalt internal clusters and zeolite hydroxyl groups. (c) 2006 Elsevier Inc. All rights reserved.