Mechanism of CO oxidation over ceria-based catalysts has been widely accepted to follow Mars−van Krevelen (MvK) mechanism involving the lattice oxygen exchange. Adsorption of CO over the metallic sites, lattice oxygen exchange, and replenishment of the support by stream oxygen are considered to be the surface processes taking place during the MvK mechanism. This study reveals an alternative MvK-type mechanism for the reaction taking place over metal ion substituted ceria-based reduced catalysts involving hopping of vacancies. The mechanism was proposed on the basis of adsorption energetics of CO and O 2 , probed with the help of density functional theory calculations. The computational analysis of different molecular systems (CeO 2 , CeO 2−δ , and Ce 1−x Pd x O 2−δ ) under study showed that adsorption of O 2 takes place over the reduced catalyst and nonsequential adsorption of CO and O 2 takes place over Ce 1−x Pd x O 2−δ in contrast to sequential adsorption of O 2 followed by CO over CeO 2−δ . Differences in the elementary surface processes in the proposed mechanism with the established MvK mechanism are highlighted with the major observation being the differences in the lattice oxygen abstraction and vacancy hopping observed with newly proposed alternative MvK mechanism.