We have previously demonstrated that silica-coated Pd cathode catalysts show high durability under severe cathode conditions in polymer electrolyte fuel cells (PEFCs), while Pd catalysts without silica-coating seriously deactivate under the same conditions due to the dissolution of Pd metal. However, the activity of silica-coated Pd catalysts for the oxygen reduction reaction (ORR) was inferior to that of Pt catalysts used in state of the art PEFCs. In the present study, the ORR activity of Pd catalysts was improved by addition of Cu. Cu-added Pd catalyst prepared with a conventional impregnation method using mixed aqueous solutions of PdCl2 and Cu(NO3)2 had an ORR activity twice that of Pd catalysts. XRD and XAFS studies showed alloy formation between Pd and Cu. Thus, Pd-Cu alloys showed higher activity for the ORR compared with Pd metal.