The effects of reactant composition and steam on propane combustion over Pd/LaFe0.8Co0.2O3 catalyst were investigated. Propane conversion and the oxidation state of palladium were strongly affected by the redox ratio of reactants. Higher propane conversion could be obtained under rich conditions and explained as a complex balance between oxidation and steam reforming. Water produced in the oxidation could promote the propane conversion by steam reforming. However, the presence of excess steam would bring about inhibition.