A catalyst formed as an aggregate of highly dispersed palladium and magnesium in silica was prepared using a reverse microemulsion synthesis. After calcination, the catalyst consists predominately of Pd containing particles 5 to 10 nm in size distributed within an amorphous oxide of Mg and Si. The catalytic activity and selectivity of the Pd-Mg/SiO2 Catalyst for CO2 methanation were characterized and compared to several other catalyst preparations. At 450 degrees C, the Pd-Mg/SiO2 catalyst had greater than 95% selectivity to CH4 at a carbon dioxide conversion of 59%, while similar catalysts without Mg have activity only for CO2 reduction to CO, and the Mg- and Si-containing oxide (without a transition metal) are relatively inactive. The results support a synergistic effect between the Pd and the Mg/Si oxide. Published by Elsevier Inc.