The mechanism of selective production of methyl chloride by a reaction of methane, hydrogen chloride, and oxygen over lanthanum-based catalysts was studied. The results suggest that methane activation proceeds through oxidation-reduction reactions on the surface of catalysts with an irreducible metal-lanthanum, which is significantly different from known mechanisms for oxidative chlorination. Activity and spectroscopic measurements show that lanthanum oxychloride (LaOCl), lanthanum trichloride (LaCl3), and lanthanum phases with an intermediate extent of chlorination are all active for this reaction. The catalyst is stable with no noticeable deactivation after three weeks of testing. Kinetic measurements suggest that methane activation proceeds on the surface of the catalyst. Flow and pulse experiments indicate that the presence of hydrogen chloride is not required for activity, and its role appears to be limited to maintaining the extent of catalyst chlorination. In contrast, the presence of gas-phase oxygen is essential for catalytic activity. Density-functional theory calculations suggest that oxygen can activate surface chlorine species by adsorbing dissociatively and forming OCl surface species, which can serve as an active site for methane activation. The proposed mechanism, thus, involves changing of the formal oxidation state of surface chlorine from -1 to +1 without any changes in the oxidation state of the underlying metal.