CeO2–CaO–Pd/HZSM5 catalyst, prepared using HZSM5 supports, with CeO2–CaO as the additive components, HZSM5 as the acid component and Pd as the hydrogenation component, have been prepared by the impregnation method, and the catalytic and sulfur-tolerant performance in the Syngas-To-Dimethyl ether (STD) reaction with thiophene and H2S as probe sulfur poisons were examined. The prepared catalyst exhibited higher catalytic performance and better sulfur resistance than a conventional catalyst based on Cu/ZnO/Al2O3 and HZSM5. The sulfur content, Pd sulfidity and acid concentration were determined in order to ascertain the adsorption sites of sulfides on the surface of the catalyst, and the products of the STD reaction from sulfur-containing syngas in an autoclave were analysed by GC-MS at different reaction times in order to determine the sulfur-tolerance mechanism of the catalyst. The study confirms that almost no H2S is absorbed on the surface of CeO2–CaO–Pd/HZSM5 catalyst, while thiophene is absorbed and activated on the acid sites of HZSM5, and hydrogen is adsorbed dissociatively on Pd active sites, followed by active hydrogen spillover to the acid sites to promote hydrogenation and thus convert the adsorbed thiophene to hydrocarbons and hydrogen sulfide.