Carbon nanofibers containing palladium nanoparticles were prepared simply by electrospinning a polymer solution containing palladium chloride and the subsequent thermal treatment in argon. It is demonstrated that palladium oxide formed in air stabilization transforms into nanoparticles through an interaction with carbon materials. Since the palladium nanoparticles covering the outer surface of nanofibers homogeneously are small enough to have high catalytic activity, this material could find applications as efficient catalysts and hydrogen sensors.