In this work, a low temperature plasma reduction technology is developed for the preparation of AuPd alloy nanocatalyst. The HAuCl4 and PdCl2 mixture as catalyst precursor was directly decomposed on MgO support by plasma to form AuPd nanoalloy. Results demonstrated that the final particles states of nanoalloys prepared by this technique including size, morphology, and chemical valence are highly dependent on temperature of plasma treatment. The catalytic performance of AuPd/MgO in the selective oxidation of benzyl alcohols can be tailored by optimizing the synthesis parameter. A relative low temperature in plasma process prevents particles migration and helps to maintain the small size that favors high activity. The AuPd nanoparticles with diameter about 3.5 nm by optimizing the plasma treatment condition exhibit superior conversion and TOF compared to catalyst prepared by the traditional high temperature H2 reduction method. It is believed that the low temperature plasma technology has a unique advantage for the preparation of high-quality alloy nanocatalyst and could be extended for fabricating the other alloy nanocatalysts.