Irreversible, thermally induced sintering of heterogeneous catalysts is one of the most deleterious causes of activity loss during catalytic reaction and/or regeneration. Silica-coated Pd catalysts (Pd@SiO2) were prepared by a simple one-pot, water-in-oil microemulsion method and investigated as models for a general synthesis to encapsulate active nanoparticle catalysts to provide stability during extended periods of cycling and regeneration under harsh experimental conditions. An idealized stability test would involve both a catalyst whose activity changes significantly as particles sinter and test conditions that could readily induce sintering. Acetylene hydrogenation was chosen as the test reaction because its catalytic and regenerative (oxidative coke removal) cycling induce the destructive sintering conditions desired for such a test. When compared with Pd particles deposited on the outside of an identical silica support (Pd/SiO2 catalyst), the silica-encapsulated catalyst Pd@SiO2 deactivates at a much slower rate and is readily regenerated without sintering over multiple reaction and regeneration cycles. It is also found that silica encapsulation suppresses coking and in situ formation of PdC. TEM, XRD, BET, XPS, and TGA, before and after reaction and regeneration, were used to characterize the encapsulated Pd@SiO2 catalysts and compare them to conventionally supported Pd/SiO2.