Pd/ZnO catalysts were investigated for steam reforming of methanol. Unlike precious metal-based catalysts, Pd/ZnO catalysts not only exhibited high activity, but more importantly very low selectivity to CO for methanol steam reforming. Under the conditions examined, the decomposition activity is minimal. The novel function is attributed to the formation of highly structured Pd--Zn alloy at moderate temperatures under mild reducing environments. The current catalytic system was characterized by TPR, transmission electron microscopy (TEM), H-2 chemisorption, and X-ray diffraction (XRD).