This study proposes a methodology to extend the utility of solid-state reactions to a synthetic route for producing a high-diversity pool of catalytic nanocrystals (NCs) by circumventing the problematic sintering of NCs at high-temperatures. For this purpose, nanometer-scale-confined NC formations/transformations were investigated using specifically designed nanometer-sized SiO2 medium with a radially differentiated core, which hinders the outward diffusion of fast moving reactants and tiny intermediates and confines the entire evolution process of single crystalline NCs (Pd, first-row-transition-metals, and their alloys) within a few-tens-nanometer-sized space. The variability of the product could be enhanced by subsequent thermal conversion of alloy- into hybrid-NCs with heterojunction interfaces. The evolution process of alloy-NCs could be examined under nanoscale confinement in the rarely explored high-temperature and solid-state environments. Further, the comparative investigation of the acquired pool of Pd-based catalytic NCs allowed us to find the most optimized one with the highest performance in CO oxidation reaction.