Noble metal nanoparticles have been applied to mediate catalytic removal of toxic oxyanions and halogenated hydrocarbons in contaminated water using H2 as a clean and sustainable reductant. However, activity loss by nanoparticle aggregation and difficulty of nanoparticle recovery are two major challenges to widespread technology adoption. Herein, we report the synthesis of a core–shell-structured catalyst with encapsulated Pd nanoparticles and its enhanced catalytic activity in reduction of bromate (BrO3–), a regulated carcinogenic oxyanion produced during drinking water disinfection process, using 1 atm H2 at room temperature. The catalyst material consists of a nonporous silica core decorated with preformed octahedral Pd nanoparticles that were further encapsulated within an ordered mesoporous silica shell (i.e., SiO2@Pd@mSiO2). Well-defined mesopores (2.3 nm) provide a physical barrier to prevent Pd nanoparticle (∼6 nm) movement, aggregation, and detachment from the support into water. Compared to freely suspended Pd nanoparticles and SiO2@Pd, encapsulation in the mesoporous silica shell significantly enhanced Pd catalytic activity (by a factor of 10) under circumneutral pH conditions that are most relevant to water purification applications. Mechanistic investigation of material surface properties combined with Langmuir–Hinshelwood modeling of kinetic data suggest that mesoporous silica shell enhances activity by promoting BrO3– adsorption near the Pd active sites. The dual function of the mesoporous shell, enhancing Pd catalyst activity and preventing aggregation of active nanoparticles, suggests a promising general strategy of using metal nanoparticle catalysts for water purification and related aqueous-phase applications.