A new catalytic system, Pd(OAc)(2)/H3PMo12O40/O-2/AcOH-H2O (2:1), has been found to give biphenyl by the oxidative dimerization of benzene with 100% selectivity and 19% yield under the conditions of 130 degreesC, 10 atm and 4 h. PdHPMo12O40 itself was also found to act as a catalyst to give 95% of selectivity of biphenyl with a lower yield. A plausible mechanism of this system is also discussed. (C) 2002 Elsevier Science B.V. All rights reserved.