Here we describe a lab-in-a-shell strategy for the preparation of multifunctional core-shell nanospheres consisting of a core of metal clusters and an outer microporous silica shell. Various metal clusters (e.g., Pd and Pt) were encapsulated and confined in the void space mediated by the entrapped polymer dots inside hollow silica nanospheres acting first as complexing agent for metal ions and additionally as encapsulator for clusters, limiting growth and suppressing the sintering. The Pd clusters encapsulated in hybrid core-shell structures exhibit exceptional size-selective catalysis in allylic oxidations of substrates with the same reactive site but different molecular size (cyclohexene ∼0.5 nm, cholesteryl acetate ∼1.91 nm). The solvent-free aerobic oxidation of diverse hydrocarbons and alcohols was further carried out to illustrate the benefits of such an architecture in catalysis. High activity, outstanding thermal stability and good recyclability were observed over the core-shell nanocatalyst.