Considering the importance of palladium-based and doped metal-oxide catalysts in CO oxidation, we design a new Pd3O9@alpha-Al2O3 catalyst and simulate its efficiency under a hydroxylated effect. The structure, electronic structure and oxidation activity of the hydroxylated Pd3O9@alpha-Al2O3(0001) surface are investigated by density functional theory. Under the O-rich growth conditions, Pd preferentially replaces Al. The lowest formation energy of the Pd-doped alpha-Al2O3(0001) surface is 0.21 eV under conditions wherein the coverage of the Pd-doped alpha-Al2O3 is 0.75 on a pre-hydroxylated surface and the water coverage is 0.25, which leads to formation of a Pd3O9 cluster embedded in the Al2O3(0001) surface. The reaction mechanisms of CO oxidization have been elucidated first by CO adsorption and migration, second by Ov formation with the first CO2 release, then by the first foreign O-2 filling and CO co-adsorption, and finally by the second CO2 desorption and restoration of the hydroxylated Pd3O9@alpha-Al2O3(0001) surface. The rate-determining step is the formation of the first CO2 in the whole catalytic cycle. The results also indicate that the energy barrier for CO oxidization is obviously reduced compared to that of the undoped surface, which implies that the introduction of Pd can efficiently improve the oxidation reactivity of the alpha-Al2O3(0001) surface. Compared to the synthesized Ir-1/FeOx (1.41 eV) and Pt-1/FeOx (0.79 eV) catalysts, the reaction activation barrier of CO oxidation is lowered by 0.65 eV and 0.03 eV, respectively. Therefore, the Pd3O9@alpha-Al2O3 catalyst shows superior catalytic activity in CO oxidation. The present results enrich the understanding of the catalytic oxidation of CO by palladium-based catalysts and provide a clue for fabricating palladium-based catalysts with low cost and high activity.