Dilute alloy catalysts have the potential to enhance selectivity and activity for large-scale reactions. Highly dilute Pd-in-Au nanoparticle alloys partially embedded in porous silica (“raspberry colloid templated” (RCT)-SiO2) prove to be robust and selective catalysts for oxidative coupling of methanol. Palladium concentrations in the bimetallic nanoparticles as low as ~3.4 at.% catalyze the production of methyl formate with a selectivity of ~95% at conversions of ~55%, whereas conversions are low (<10%) for ~1.7 at.% Pd-in-Au nanoparticle and pure Au nanoparticle catalysts. Fractional reaction orders for both CH3OH and O2measured for ~3.4 at.% Pd-in-Au nanoparticles supported on RCT-SiO2 indicated a complex mechanism in which the sites for O2 dissociation are not saturated. Optimal methyl formate production was found for an equimolar mixture. There is no conversion of methanol in the absence of O2 between 360 and 450 K. All observations are consistent with a mechanism derived from model studies, requiring that clusters of Pd be available on the catalyst for O2 dissociation.