The development and application of Fe-rich palygorskite clay has been restricted significantly by its red colour and low grade. Moreover, the nano-structured properties of palygorskite and the relatively large Fe content of Fe-rich palygorskite clay have received insufficient attention. The present study involved the synthesis of Ni-based catalysts via a coprecipitation method using Fe-rich palygorskite clay as the support. The catalysts were then evaluated for their performance for catalytic steam reforming of toluene (CSRT). The experimental findings revealed that the Fe in Fe-rich palygorskite clay interacted strongly with Ni and formed Fe-Ni alloys. The catalyst with a Ni/Fe mass ratio of 14 (Ni14/FePal) calcined in air at 600°C exhibited superior performance for CSRT under the reaction temperature 700°C and S/C molar ratio of 1.0. According to the kinetics study, Ni14/FePal exhibited the lowest apparent activation energy (33.99 kJ mol−1) among the catalysts, which further confirmed the superior catalytic activity in CSRT. The characterizations of the catalysts used demonstrated that the excellent stability and resistance to coke formation of Ni14/FePal were attributable to the presence of a sufficient amount of highly dispersed Fe-Ni alloys on its surface.