Production of 2,5-furandicarboxylic acid (FDCA, a platform chemical for the chemical industry in the future) by the selective aerobic oxidation of 5-hydroxymethyl-furfural is a crucial component to enable the FDCA production from sugars. The challenge is to achieve a high FDCA yield at low temperatures. Here, we report a catalyst composed of alloyed nanoparticles (containing 1.5 wt % Ag and 1.5 wt % Pd) supported on CeO2 nanofibers, which achieved an excellent FDCA yield (93%) at 20 °C. Interesting observations include yield deterioration at higher reaction temperatures; water is the source of the oxygen atom(s) added to the oxidized intermediates and product, while O2 molecules adsorbed onto the catalyst scavenge electrons, yielding OH• radicals from OH– ions in the reaction system to drive the oxidation. At 20 °C, we avoid side reactions, but there is no external energy provided for overcoming the activation barriers. The barriers for activating the alcohol groups are significant. We find that the appropriate chemisorption on the catalyst is critical for a high FDCA yield. By tuning the Ag/Pd ratio, we attained the most catalytically active sites, bimetallic surface sites, at the boundaries between Ag and Pd clusters. The chemisorption at these sites is strong enough to cause the selective oxidation of both the aldehyde and alcohol groups in HMF at 20 °C, avoiding side reactions at high temperatures. The knowledge acquired from this study is expected to have implications for other catalytic systems where competitive reactions proceed.