The development of palladium nanoparticles (PdNPs) with a narrow size distribution is an important aspect of nanotechnology. Methanobactin (Mb) is a copper-binding small peptide that appears to function as an agent for copper sequestration and uptake in methanotrophs. Here, Mb was shown to bind and catalytically reduce Pd (II) to Pd (0). The one-step synthesis of monodisperse PdNPs using Mb as both coordination agent and reduction agent is reported. Fluorescence spectra, UV-visible spectra, X-ray photoelectron spectroscopy (XPS) and Fourier transform-infrared spectroscopy (FT-IR) suggested that the Mb molecules catalytically reduce Pd (II) to Pd (0) with the concomitant production of PdNPs. The Mb is then adsorbed onto the surface of the PdNPs to form an Mb-PdNPs coordination compound. This avoids secondary nucleation. The PdNPs are small with high monodispersity and are easily synthesized in Mb solution. The PdNPs were extremely stable and resisted aggregation even after several months.