Pd-α-Fe₂O₃ and Pd-γ-Fe₂O₃ catalysts were acquired by treating Pd–Fe catalysts with redox pretreatment. These catalysts were characterized by various techniques and applied in the CO oxidation reaction. Characterization reveals that the Pd-α-Fe₂O₃ catalyst is obtained after calcination in air at 400 °C. The following reduction at lower temperature forms the Pd-γ-Fe₂O₃ catalyst. In the case of larger Pd (or PdO) and Fe₂O₃ nanoparticles, the Pd-γ-Fe₂O₃ catalyst is highly active for low temperature CO oxidation compared with the Pd-α-Fe₂O₃ catalyst, which may originate from the high oxygen storage properties of γ-Fe₂O₃ and stronger interaction between Pd and γ-Fe₂O₃. Higher reduction temperature results in much larger particle sizes and decreased activity. Stability tests also indicate that the highly active Pd-γ-Fe₂O₃ catalyst could transform to Pd-α-Fe₂O₃ in reactive atmosphere, leading to catalyst deactivation. Re-reduction treatment of the inactivated catalyst results in reproduction of the activity.