Several ceria‐zirconia supported mono and bi‐metallic transition metal oxide clusters containing Fe, Cu, and Ni are synthesized by dry impregnation. Through XRD, H2‐TPR, NH3‐TPD, pyridine adsorption followed by FTIR spectroscopy and XAS, the well‐dispersed nature of the transition metal oxide clusters is revealed, and the Lewis acidity of the catalysts is assessed. In‐situ FTIR spectroscopy is used to monitor the methane activation on catalyst surfaces. All catalysts activate methane at 250 °C forming methyl, alkyl, and methoxy species on the catalyst surface. By co‐feeding steam and oxygen together with methane, continuous direct oxidation of methane to methanol can be achieved, with the complete oxidation to CO2 as the other reaction path. Methoxy species are found to be a key intermediate for methanol production. Lowering the methane conversion improves the methanol selectivity. By extrapolation, it is estimated that methanol selectivity close to unity can be achieved below a threshold of methane conversion at about 0.002 %. The formation of CuO and NiO mixed metal oxides produces stronger Lewis acid sites and yields higher methanol selectivity.