Hydrogenation of CO was carried out over Pd catalyst supported on Al₂O₃, MgO, silica alumina, and silica gel supports. Addition of CeO₂ increased the activity of Pd/Al₂O₃ and the main product was dimethyl ether (DME). DME formation proceeded via dehydration of methanol on the acid sites of the supports. However, the yield of DME was much higher over Al₂O₃ than silica alumina. Therefore, Al₂O₃ has an inherently high activity for methanol production. Temperature programmed reduction experiments showed that CeO₂ on Al₂O₃ was reduced with H₂, whereas CeO₂ on MgO underwent little reduction as confirmed by a XAFS measurement. XAFS analysis indicated that Pd/CeO₂/MgO contained Pd⁰ plus Pd²⁺ owing to the presence of the reduction-resistant CeO₂ on MgO and the Pd on CeO₂/Al₂O₃ was in a more reduced state although Pd²⁺ still remained. The results of CO adsorption measurement and XAFS and TEM observation revealed that an addition of CeO₂ increased the dispersion of Pd metal particles on Al₂O₃. The intermediate strength interactions between Pd, CeO₂, and Al₂O₃ seems to account for the higher activity of the Pd/CeO₂/Al₂O₃ catalyst for O-containing compounds formation than Pd/CeO₂/MgO.