The rational design of Pd-based catalysts to enhance their applications in ethanol oxidation reaction (EOR) presents both exciting opportunities and significant challenges. Herein, a series of carbon-supported PdSn nanoparticle catalysts (PdSn/C-X, X = 0.1, 0.5, 1, 2) with tunable lattice strains were synthesized using a facile method at room temperature and applied to the EOR. Our findings demonstrate that the activity and stability of EOR can be modulated by manipulating the lattice strain in Pd-based catalysts. Remarkably, PdSn/C-1 exhibits an excellent mass current density of 8,452.3 mA/mgPd, which is higher than that of most Pd-based catalysts, along with great stability, maintaining a mass activity of 573.9 mA/mgPd after 5,000 s. By combining structural analysis, in situ spectral characterization, and theoretical calculation, we elucidate that the optimal tensile strain adjusted by Sn composition in PdSn/C optimizes the free energy of the key intermediate (*CH2CO) during EOR, thereby favoring the C1 pathway and enhancing catalytic activity. This study demonstrates that by controlling the composition, the lattice strain can be altered to improve catalytic performance of Pd-based catalysts in EOR.