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Recently, a so-called `crown-jewel' concept of preparation of Au/Pd-based colloidal nanoclusters has been reported [Zhang, Watanabe, Okumura, Haruta & Toshima (2011). Nat. Mater. 11, 49-52]. Here, a different way of preparing highly active Au/Pd-based nanoclusters is presented. The origin of the increased activity of Au/Pd-based colloidal bimetallic nanoclusters was unclear up to now. However, it is, in general, accepted that in the nanometre range (1-100 nm) the cluster size, shape and composition affect the structural characteristics (e.g. lattice symmetry, unit cell), electronic properties (e.g. band gap) and chemical properties (e.g. catalytic activity) of a material. Hence, a detailed study of the relationship between the nanostructure of nanoclusters and their catalytic activity is presented here. The results indicate that a high surface-to-volume ratio of the nanoclusters combined with the presence of `both' Au and Pd isolated regions at the surface are crucial to achieve a high catalytic activity. A detailed structure elucidation directly leads to a mechanistic proposal, which indeed explains the higher catalytic activity of Au/Pd-based catalysts compared with pure metallic Au or Pd. The mechanism is based on cascade catalysis induced by a single type of nanoparticle with an intermixed surface of Au and Pd.