NO reduction with methane over Co-ZSM-5 has been studied in an oxidizing atmosphere. Although the activity was reduced due to the poisoning of oxygen, NO decomposed over Co-ZSM-5 to nitrogen and oxygen in two different temperature ranges, 100-300 degrees C and > 400 degrees C. This suggests the presence of two types of Co2+ cations in ZSM-5. The adsorption of NO, NO2 and CH4, as well as the reduction of NO with methane in O-2 were studied with in-situ diffuse reflectance Fourier-transform infrared spectroscopy (DRIFT). NO and methane molecules were only weakly adsorbed on Co-ZSM-5, and would desorb completely at the reaction temperature. The presence of oxygen was found to enhance the NO interaction with Co-ZSM-5, leading to the formation of adsorbed NO2 intermediates. The adsorbed NO2 would activate methane molecules and yield hydrogen and methyl radicals, which could in turn react with NO2 to generate nitromethane intermediates. A tentative reaction mechanism has been proposed to elucidate the production of N-2, N2O, H2O, formaldehyde and CO2.