Water-soluble Pd nanoparticles (diameter 3.5 +/- 1.0 mn) modified with covalently-attached cyclodextrin (CD) receptors were prepared by the reduction of PdCl42- in dimethylformamide solution containing perthiolated beta -CD. These Pd nanoparticles behave as active catalysts for the hydrogenation of alkenes in aqueous media. For instance, the turnover frequency for the hydrogenation of 1-butenyltrimethylammonium bromide (1) was found to be 320 (moles of 1) (moles of Pd)(-1) h(-1) at 25 degreesC and 1.0 atm of H-2(g). The addition of cationic ferrocene derivatives, such as ferrocenylmethyltrimethylammonium bromide (3), to the reaction medium decreases the catalytic activity of the Pd nanoparticles. Other CD substrates, such as anionic ferrocene derivatives or neutral adamantanol, are much less effective as inhibitors of the catalytic hydrogenation process.