Pd-ceria and Pd-ceria-zirconia catalysts were prepared by solution combustion synthesis (SCS) and tested for methane oxidation in presence of 10 vol% H2O. Their behavior was compared with that of traditional incipient wetness impregnated catalysts (IW). Both SCS samples showed better stability and complete recovery of catalytic activity after prolonged time-on-stream at 723 K in cycling wet/dry atmosphere compared to IW ones. During transient light-off experiments, the increase in the temperature to achieve 30% methane conversion was of only 34 K for Pd/Ce0.75Zr0.25O2 SCS. The better performance of SCS samples has been attributed to their strong Pd-ceria interaction and to their higher oxygen exchange capability, as measured by Temperature Programmed Reduction experiments and oxygen storage capacity measurements. For Pd/Ce0.75Zr0.25O2 SCS, CO chemisorption, DRIFT and TEM characterization revealed the presence of very small Pd nanoparticles also after the aging cycle, indicating that on this sample palladium is present in a finely dispersed form that remains stable during cycling wet/dry atmosphere.