Pd-chloride precursor salt was used to prepare Pd/Al2O3 catalysts. TPSR measurements showed three distinct reactions for the oxidation of propane on palladium surface under excess of hydrocarbon: complete oxidation, steam reforming and propane hydrogenolysis. Propane oxidation on palladium catalysts was related to the Pd2+ sites observed on Pd/Al2O3 through infrared of adsorbed carbon monoxide. In fresh catalysts reduced by H-2, the IR spectra showed the linear and bridge adsorbed CO species on the Pd-0 surface. After propane reaction, a new band at 2130 cm(-1) related to CO adsorption on Pd2+ species was noted. Carbon monoxide species adsorbed on Pd-0 were also observed in all samples after reaction. Our results suggest surface ratios of Pd-0/PdO during the propane oxidation. On the other hand, time on stream conversions of the complete oxidation of propane were affected by either the water generated during the reaction or added as a reactant at 10 vol%. The water generated by the reaction helped to eliminate chlorine residues in the form of oxychloride species leading to an increasing of the activity. However, the presence of water into the reaction mixture caused a strong decreasing of the activity. The inhibition mechanism of propane oxidation in the presence of water consisted in the dissociative adsorption of water on palladium sites with the possible formation of palladium hydroxide (Pd-OH) at the surface, diminishing the number of active surface sites. Dynamic fluctuations into the reaction conditions supported the idea that a pseudo-equilibrium adsorption-desorption of water was reached. After water removal or increasing in the reaction temperature the equilibrium was shifted to the direction of OH-Pd decomposition. This behavior suggests that the inhibitory effect of water is a reversible phenomenon, being a function of the amount of water and the reaction temperature.