Methyltheophylline is known to be effective and highly selective extractant for Pd in the solvent extraction process. The high selectivity for Pd extraction might be due to the formation of chelate complex of Pd and methyltheophylline. The chelate complexes made insoluble precipitate in organic solvent when it became a certain condition. Partially-oxidized Pd nanoparticles below 100 nm were obtained by calcination of the precipitate. Pd/γ-Al2O3 and Pd/cordierite honeycomb catalysts were prepared by conventional impregnation method using the organic solvent containing Pd extracted from aqueous solution, and their catalytic activities for toluene combustion were compared with that of the Pd catalysts prepared from PdCl2 aqueous solution. Consequently, the Pd catalyst prepared by using Pd extracted organic solvent showed remarkably higher activity for toluene combustion than that prepared from PdCl2 aqueous solution.