An organic-water interfacial technique has been successfully extended to the synthesis of phenylacetic and phenylenediacetic acids based on the use of surface-active palladium-(4-dimethylaminophenyl)diphenylphosphine complex in conjunction with dodecyl sodium sulfate to effect the carbonylation of benzyl chloride and dichloro-p-xylene in a toluene-aqueous sodium hydroxide mixture. The product yields at 60 degrees C and 1 atm are essentially quantitative based on the substrate conversions, although carbon monoxide also undergoes a slow hydrolysis reaction along with the carbonylation reactions. The side reaction produces formic acid and is catalyzed by aqueous base but not by palladium. The phosphine ligand is stable to the carbonylation reactions and the palladium can be recovered quantitatively as a compact emulsion between the organic and aqueous phases after the reaction, but the catalytic activity of the recovered palladium is about a third of its initial activity due to product inhibition. The carbonylation of benzyl chloride has an activation energy of 100 kJ/mol, a first-order dependence on the catalyst and substrate concentrations, a zero-order dependence on the carbon monoxide partial pressure, and a variable-order dependence on the aqueous base concentration. A kinetic model is proposed which yields a rate law in accord with the experimental findings.