Pd-based catalysts are widely used in the oxidation of CH4 and have a significant impact on global warming. However, understanding their active sites remains controversial, because interconversion between Pd and PdO occurs consecutively during the reaction. Understanding the intrinsic active sites under reaction conditions is critical for developing highly active and selective catalysts. In this study, we demonstrated that partially oxidized palladium (PdOx) on the surface plays an important role for CH4 oxidation. Regardless of whether the initial state of Pd corresponds to oxides or metallic clusters, the topmost surface is PdOx, which is formed during CH4 oxidation. A quantitative analysis using CO titration, diffuse reflectance infrared Fourier-transform spectroscopy, X-ray diffraction, and scanning transmission electron microscopy demonstrated that a surface PdO layer was formed on top of the metallic Pd clusters during the CH4 oxidation reaction. Furthermore, the time-on-stream test of CH4 oxidation revealed that the presence of the PdO layer on top of the metallic Pd clusters improves the catalytic activity. Our periodic density functional theory (DFT) calculations with a PdOx slab and nanoparticle models aided the elucidation of the structure of the experimental PdO particles, as well as the experimental C-O bands. The DFT results also revealed the formation of a PdO layer on the metallic Pd clusters. This study helps achieve a fundamental understanding of the active sites of Pd and PdO for CH4 oxidation and provides insights into the development of active and durable Pd-based catalysts through molecular-level design.