For maximizing the atomic efficiency in noble metal-based catalysts, dedicated preparation routes and high lifetime are essential. Both aspects require an in-depth understanding of the fate of noble metal atoms under reaction conditions. For this purpose, we used a combination of complementary in situ/ operando characterization techniques to follow the lifecycle of the Pd sites in a 0.5% Pd/5% CeO 2 −Al 2 O 3 catalyst during oxygen-rich CO oxidation. Timeresolved X-ray absorption spectroscopy showed that Pd cluster formation under reaction conditions is important for a high CO oxidation activity. In combination with density functional theory calculations, we concluded that the ideal Pd cluster size amounts to about 10−30 Pd atoms. The cluster formation and stability were affected by the applied temperature and reaction conditions. Already short pulses of 1000 ppm CO in the lean reaction feed were found to trigger sintering of Pd at temperatures below 200 °C, while at higher temperatures oxidation processes prevailed. Environmental transmission electron microscopy unraveled redispersion at higher temperatures (400−500 °C) in oxygen atmosphere, leading to the formation of single sites and thus the loss of activity. However, due to the reductive nature of CO, clusters formed again upon cooling in reaction atmosphere, thus closing the catalytic cycle. Exploiting the gained knowledge on the lifecycle of Pd clusters, we systematically investigated the effect of catalyst composition on the cluster formation tendency. As uncovered by DRIFTS measurements, the Pd to CeO 2 ratio seems to be a key descriptor for Pd agglomeration under reaction conditions. While for higher Pd loadings, the probability of cluster formation increased, a higher CeO 2 content leads to the formation of oxidized dispersed Pd species. According to our results, a Pd:CeO 2 weight ratio of 1:10 for CeO 2 −Al 2 O 3 -supported catalysts leads to the highest CO oxidation activity under lean conditions independent of the applied synthesis method.