Palladium and cerium oxide nanoparticles obtained by pulsed laser ablation (PLA) in liquid (water or ethanol) have been used as nanostructured precursors for synthesis of the composite Pd/CeO2 catalysts. The initial mixture of Pd and CeO2 nanoparticles does not show catalytic activity at temperatures lower than 100°C. It has been found that the composites prepared by PLA in alcohol are easily activated by calcination in air at 450-600°C demonstrating high activity at room temperature. Application of XRD, TEM and XPS reveals that laser ablation in water leads to the formation of large and well crystallized nanoparticles of palladium and CeO2, whereas ablation in alcohol results in formation of much smaller PdCx nanoparticles. The activation of the composites takes place due to the strong Pd-ceria interaction which occurs easier for highly-dispersed defective particles obtained in alcohol. Such interaction implies the introduction of palladium ions into the ceria lattice with formation of a mixed phase of PdxCe1-xO2-x-δ solid solution at the contact spaces of palladium and cerium oxide nanoparticles. The TPR-CO and XPS data show clearly that on the surface of the PdxCe1-xO2-x-δ solid solution the oxidized PdOx(s)/Pd-O-Ce(s) clusters are formed. These clusters comprise the highly reactive oxygen which is responsible for the high catalytic activity in LTO CO.Please do not adjust margins Please do not adjust margins CO (molecules/cm 3 ), X is the CO conversion, V RM is the reaction mixture rate (cm 3 /sec), m is the weight of the sample (g), and