We report a simple and environmentally-benign method for the synthesis of Pd nanoclusters through a continuous etching process. With the help of l-methionine, newly-formed Pd nanoparticles (larger than 50 nm) will gradually reduce their size, finally resulting in the formation of tiny nanoclusters with a diameter around 1.4 nm. A following sol-gel process can encapsulate these highly-active nanoclusters into a silica matrix. In this way, Pd nanoclusters can be stabilized and can sustain a high temperature treatment up to 600 °C. Moreover, these Pd nanoclusters are proved to be promising for a catalytic Suzuki reaction. Due to the composite structure of nanoclusters and silica, the Pd@SiO2 catalysts show integrated merits including good catalytic activity, high stability and notable cyclability.