The activity and stability of Pt5Gd for the oxygen reduction reaction (ORR) have been studied, using a combination of electrochemical measurements, angle-resolved X-ray photoelectron spectroscopy (AR-XPS), and density functional theory calculations. Sputter-cleaned, polycrystalline Pt5Gd shows a 5-fold increase in ORR activity, relative to pure Pt at 0.9 V, approaching the most active in the literature for catalysts prepared in this way. AR-XPS profiles after electrochemical measurements in 0.1 M HClO4 show the formation of a thick Pt overlayer on the bulk Pt5Gd, and the enhanced ORR activity can be explained by means of compressive strain effects. Furthermore, these novel bimetallic electrocatalysts are highly stable, which, in combination with their enhanced activity, makes them very promising for the development of new cathode catalysts for fuel cells.