Nano Ce-Zr-Y (CZY) oxide solid solution was synthesized using hydrothermal method using the nitrate of cerium, zirconium, and yttrium as raw materials and urea as a hydrolysis agent. The sample was characterized using a X-ray diffraction and FT-Raman spectra to show whether Zr and Y ions were incorporated into the crystal cell of CeO2. Scanning electronic microscopy and transmission microscopy images were recorded to examine the particle morphology. Meanwhile, the palladium-only three-way catalyst (TWC)-containing CZY was prepared and evaluated under the condition of simulated exhaust. The results show that CZY has a cubic fluorite structure and the as-synthesized solid solution has a particle diameter less than 100 nm. The TWC-containing CZY has a higher catalytic activity including a wider operation window of air/fuel ratio and a lower lighter-off temperature.