The biphasic palladium-catalysed cleavage of water-insoluble allylic substrates in the presence of methylated cyclodextrins has been investigated with the aim of performing substrate-selective catalytic reactions. While no substrate selectivity was observed in control experiments in which acetonitrile was used as mass transfer promoter, the use of DMCyD led in some cases to high substrate selectivities. For instance, a 97:3 product ratio was observed during the cleavage of a 50:50 mixture of N-dodecyl-O-allyl urethane and N,N-dihexyl-O-allyl urethane. The whole results demonstrate that the size-fit concept which postulates the highest reactivity for the best size-matched host-guest pair is limited to predict the substrate selectivity.