Mesoporous zirconia nanophases with structural defects were synthesized by using a surfactant-templated method. Physicochemical properties and crystalline structures of the zirconia nanophases were studied by means of thermogravimetric analysis (TGA), N-2 physosorption isotherm and in situ Fourier transform infrared (FT-IR) spectroscopy, transmission electron microscopy (TEM) and X-ray diffraction (XRD) techniques. The resultant materials show typical mesoporous features which vary with calcination temperature. The cationic surfactant in the network of the solids induces structural deformation and defect creation. The zirconia consists of monoclinic and tetragonal nanophases which contains many structural defects, and its crystalline structure shows microstrain. Both, concentration of lattice defects and degree of the crystal microstrain, decrease as the calcination temperature is increased. When CO is adsorbed on the surface of Pd/ZrO2, linear bonds of CO-Pd-0, CO-Pd delta+ and CO-Zr4+ are formed, accompanying with CO2 production. Catalytic evaluation shows that the Pd/ZrO2 catalyst is very active for CO oxidation and NO reduction. In the case of oxygen absence from reaction mixture, high selectivity to N-2 is achieved without any NO2 formation. In the oxygen rich condition, CO conversion is enhanced but less than 19% NO2 is produced. N2O is formed only in the reducing condition and its selectivity is sensitive to reaction temperature. The possible mechanisms of NO+CO and NO+CO+O-2 reactions over Pd/ZrO2 catalyst related to reactant dissociation on the Pd metals and to defective structure of the nanozirconia support are discussed. (C) 2008 Elsevier B.V. All rights reserved.