To probe the nature of metal-catalysed processes and to design better metal-based catalysts, atomic scale understanding of catalytic processes is highly desirable. Here we use aberration-corrected environmental transmission electron microscopy to investigate the atomic scale processes of silver-based nanoparticles, which catalyse the oxidation of multi-wall carbon nanotubes. A direct semi-quantitative estimate of the oxidized carbon atoms by silver-based nanoparticles is achieved. A mechanism similar to the Mars–van Krevelen process is invoked to explain the catalytic oxidation process. Theoretical calculations, together with the experimental data, suggest that the oxygen molecules dissociate on the surface of silver nanoparticles and diffuse through the silver nanoparticles to reach the silver/carbon interfaces and subsequently oxidize the carbon. The lattice distortion caused by oxygen concentration gradient within the silver nanoparticles provides the direct evidence for oxygen diffusion. Such direct observation of atomic scale dynamics provides an important general methodology for investigations of catalytic processes.