The effect of CO on the reaction of a terminal alkyne with CO and H2O in the presence of PdI2-KI was studied. With simple 1-alkynes such as alkyl- or arylacetylenes in the absence of added CO2 a catalytic process takes place with formation of substituted furan-2(5H)-ones 1, deriving from a reductive carbonylation process. Oxidation Of CO to CO2 accounts for the stoichiometry of the reaction. The latter may occur through decarboxylation of a Pd-CO2H species with formation of a Pd-H species, which is in turn responsible for the reduction process. It has been found that working in the presence of added CO2 the latter can also work as hydrogen acceptor, probably via its insertion into the Pd-H bond. In this way a catalytic synthesis of maleic anhydrides 2, corresponding to an oxidative carbonylation process, can be obtained even in the absence of external oxidants. In contrast with simple 1-alkynes, the use of 2-methylbut-3-yn-2-ol in the absence of added CO2 results in additive carbonylation with formation of teraconic anhydride 5, formally deriving from the combination of oxidative dicarbonylation and reduction. No CO2 effect is observed in this case, which rules out the intervention of Pd-H species in the catalytic cycle leading to 5. As expected, however, carbon dioxide effect is felt by secondary products resulting from reductive carbonylation, their formation being curtailed by CO2 addition to the reaction mixture. (C) 2003 Elsevier Science B.V. All rights reserved.