Methane (CH 4) combustion is an increasingly important reaction for environmental protection, for which Pd/CeO 2 has emerged as the preferred catalyst. There is a lack of understanding of the nature of the active site in these catalysts. Here, we use density functional theory to understand the role of doping of Pd in the ceria surface for generating sites highly active toward the C-H bonds in CH 4. Specifically, we demonstrate that two Pd 2+ ions can substitute one Ce 4+ ion, resulting in a very stable structure containing a highly coordinated unsaturated Pd cation that can strongly adsorb CH 4 and dissociate the first C-H bond with a low energy barrier. An important aspect of the high activity of the stabilized isolated Pd cation is its ability to form a strong σ-complex with CH 4, which leads to effective activation of CH 4. We show that also other transition metals like Pt, Rh, and Ni can give rise to similar structures with high activity toward C-H bond dissociation. These insights provide us with a novel structural view of solid solutions of transition metals such as Pt, Pd, Ni, and Rh in CeO 2, known to exhibit high activity in CH 4 combustion.