Abstract: The raw multi-walled carbon nanotubes (MWCNTs) were treated with nitric acid. The shift of the surface functional groups on the MWCNTs was observed with XPS. The Pd/MWCNTs catalysts were synthesized by the ultrasonic impregnation method. The total contents of oxygen, hydroxyl and carbonyl groups were measured. The dispersion and size distribution of Pd particles were characterized with TEM. The dependence of Pd dispersion on the oxygen-containing functional groups was validated. The effect of pretreatment on the catalytic activity and stability for methane combustion was investigated under lean fuel conditions. It is shown that the catalytic activity depends on the valence state and particle size of palladium. The transformation from Pd to PdO possibly caused the decrease in the catalytic activity. Another factor inducing deactivation is Pd particle aggregation. The reaction mechanism for methane combustion over the Pd/MWCNTs catalyst is postulated on the basis of the intermediate species detected by in-situ FT-IR spectroscopy.