Practical applications of Pd-based catalysts are severely limited by sintering. A discontinuous shattered nanotube composed of ceria nanoparticles was employed as the shell in this work, and Pd@CeO2 core-shell nanotube catalysts were prepared using multiwalled carbon nanotubes as sacrificial templates, in which the noble metal was preserved at high dispersion, even after being treated at high temperature due to physical confinement and interaction confinement. The quantitative ratio of exposed Pd atoms to interacted Pd atoms could be readily manipulated by fabricating CeO2 shells with varied degrees of thickness and sparseness. The characterization and catalytic evaluation taken together reflected the roles of exposed Pd atoms which offered sites for CO adsorption and reaction, and interacted Pd atoms which activated the interfacial lattice oxygen and multiplied the adsorption oxygen. The enhanced catalytic performance would appear under an optimal distribution of Pd species after deliberate manipulation.