Palladium/zirconia catalysts prepared by oxidation of an amorphous PdZr3 alloy were tested for the oxidation and disproportionation of CO. Their catalytic and structural properties were compared with those of a Pd/ZrO2 catalyst of similar composition, prepared by conventional coprecipitation. For the preparation of Pd/ZrO2, the glassy PdZr3 alloy was either oxidized in situ, i.e. under CO oxidation conditions, or oxidation in air. The catalysts were characterized by thermal analysis (TG, DTA), XRD, electron microscopy, CO chemisorption and nitrogen physisorption measurements. In situ oxidation of the Pd-Zr alloy led to significantly higher BET and palladium surface areas than oxidation in air. The catalysts derived from the glassy Pd-Zr alloy exhibited considerably higher activities for both oxidation and disproportionation of CO at low temperature than the coprecipitated Pd/ZrO2 catalyst and palladium powder. The higher activities are attributed to the extremely large interfacial area of palladium and zirconia phases in the alloy-derived Pd/ZrO2 compared to the coprecipitated catalyst. For both alloy-derived catalysts the apparent activation energy for CO oxidation was 58 +/- 3 kJmol(-1). In the absence of oxygen, disproportionation of CO with subsequent incorporation of carbon into the palladium lattice occurred with the alloy-derived catalysts readily at ca. 150 degrees C, whereas no similar phenomenon was observed with the palladium powder up to 400 degrees C. The interstitial carbon was found to be very reactive towards oxygen forming CO2. The storage of carbon by formation of a solid solution with Pd was found to influence significantly the behaviour of the catalyst under forced cycling between CO and O-2 feed.