The structure and catalytic properties of ultrafine Mo-Ce oxide particles prepared by the sol-gel method have been studied by using X-ray diffraction, transmission electron microscopy, temperature-programmed reduction, laser Raman spectroscopy and microreactor tests. It has been shown that for selective oxidation of toluene to benzaldehyde the ultrafine Mo-Ce oxide particles exhibit higher catalytic activity than the larger oxide particles prepared by a conventional coprecipitation method. The unique catalytic properties of ultrafine Mo-Ce oxide particles may be correlated not only to the interaction between molybdenum oxide and cerium oxide, but also to the higher reactivity of lattice oxygen species in the ultrafine oxide matrix.