A new distributed mathematical model of reaction of CO oxidation over Pd-zeolite catalyst is presented. The model takes into account passing of the reactant flow through the catalyst layer, diffusion in pores of zeolite matrix, reaction on the surface of embedded Pd clusters, heat effect of the reaction, heat and mass transfer across the catalyst layer. Reaction on the Pd clusters is described by the new point model suggested herein. The model admits the existence of regular, chaotic and mixed-mode oscillations at the values of the parameters close to the experimental conditions.