Zeolite-supported metal catalysts are widely employed in a number of chemical processes, and the stability of the catalytically active species is one of the most critical factors determining the reaction performance. A good example is the Pd/zeolite catalyst, which provides high activity for methane oxidation but deactivates rapidly under the reaction conditions due to palladium nanoparticle sintering. Although coating the metals with thin shells of porous materials is a promising strategy to address the sintering of metals, it is still challenging to fix small metal particles completely inside zeolite crystals. Here, using an amine-based ligand to stabilize palladium during the zeolite synthesis, we realize the exclusive encapsulation of highly dispersed palladium oxide clusters (1.8-2.8 nm) in the microporous channels and voids of the nanosized silicalite-1 crystals. The synthesis conditions of the zeolite-supported catalyst influence the encapsulation degree and the size distribution of metal particles. Thanks to the encapsulation effect of small palladium oxide clusters, together with the inherent properties of silicalite-1 such as low acidity, high hydrophobicity, and high hydrothermal stability, the optimized Pd@silicalite-1 catalyst outperforms the traditional Pd-based catalysts prepared by wetness impregnation, exhibiting both high activity and better stability in the lean methane oxidation reaction.