Nanostructured Pd-modified Ni/CeO2 catalyst was synthesized in a single step by solution combustion method and characterized by XRD, TEM, XPS, TPR and BET surface analyzer techniques. The catalytic performance of this compound was investigated by performing the water gas shift (WGS) and catalytic hydrogen combustion (CHC) reaction. The present compound is highly active and selective (100%) toward H2 production for the WGS reaction. A lack of CO methanation activity is an important finding of present study and this is attributed to the ionic substitution of Pd and Ni species in CeO2. The creation of oxide vacancies due to ionic substitution of aliovalent ions induces dissociation of H2O that is responsible for the improved catalytic activity for WGS reaction. The combined H2-TPR and XPS results show a synergism exists among Pd, Ni and ceria support. The redox reaction mechanism was used to correlate experimental data for the WGS reaction and a mechanism involving the interaction of adsorbed H2 and O2 through the hydroxyl species was proposed for CHC reaction. The parity plot shows a good correspondence between the experimental and predicted reaction rates. © 2012 Elsevier B.V.