The extent of alloying and the alloy composition, which are crucial in determining the activity and selectivity of bimetallic catalysts, were studied in porous silica encapsulated AgPd catalysts using XRD, HRTEM and HAADF-STEM. Water-dispersible ligand protected Pd ultra-small clusters and Ag nanoparticles of three different sizes were used as the precursors. The high reactivity of Pd ultra-small clusters enhanced the alloying of larger Ag nanoparticles to some extent. Encapsulation appeared to have minimised the sintering of the resultant nanoparticles. The earlier suggestions of the role of d-band positions with respect to adsorption energies holds good for the AgPd system and alloying enhances the activity. Alloy with the composition of Ag50Pd50 was found to be the most active with the reaction rate enhanced two fold compared to that in other compositions. Other factors like particle size and sinter-resistance also played important roles in enhancing the activity of these catalysts. © 2017 The Royal Society of Chemistry and the Centre National de la Recherche Scientifique.