Atomic steps at the surface of a catalyst play an important role in heterogeneous catalysis, for example as special sites with increased catalytic activity. Exposure to reactants can cause entirely new structures to form at the catalyst surface, and these may dramatically influence the reaction by 'poisoning' it or by acting as the catalytically active phase. For example, thin metal oxide films have been identified as highly active structures that form spontaneously on metal surfaces during the catalytic oxidation of carbon monoxide. Here, we present operando X-ray diffraction experiments on a palladium surface during this reaction. They reveal that a high density of steps strongly alters the stability of the thin, catalytically active palladium oxide film. We show that stabilization of the metal, caused by the steps and consequent destabilization of the oxide, is at the heart of the well-known reaction rate oscillations exhibited during CO oxidation at atmospheric pressure.