The oxidative decomposition of trichloroethylene (TCE) was investigated using palladium catalysts supported on pure and sulfated zirconia. The reactions were performed under dry and wet conditions in the temperature between 200 and $550^{circ}C$ keeping GHSV of 14,000 $h^{-1}.$ The products such as $C_2Cl_4,;C_2HCl_5,;CO;and;CO_2$ were observed in the reaction. The addition of water in the feed affected the distribution of reaction product with dramatically improved catalytic activity. The spectroscopic investigations gave an evidence that the strong acid sites play an important role on controlling the catalytic activity. Among the catalysts investigated, the Pd-loaded sulfated zirconia catalyst with 1 wt% Pd was found to exhibit the highest catalytic activity in the presence of water vapor having the stability for 30 h of the reaction at $500^{circ}C$. The successful performance of the catalyst might be attributed to promotional effect of Pd active sites and strong acid sites induced from surface sulfate species on zirconia.