The hydroxylation of benzene and toluene with hydrogen peroxide, catalysed by iron complexes with nitrogen ligands in a biphasic reaction medium, was investigated. After testing a series of pyridine and pyrazinecarboxylic acid derivatives, it was found that the ligand markedly affects the catalyst efficiency and the selectivity based on the oxidant. In the case of toluene, the ligand has a tuning effect on the catalyst activity, driving the oxidation preferentially to the ring or to the methyl group. The complex with pyrazine-3-carboxylic acid N-oxide was selected as the most efficient catalyst and appears to be a promising tool for the direct synthesis of phenols. The mechanism of the aromatic hydroxylation is also discussed, in comparison with the conventional Fenton's reagent. (C) 2003 Elsevier Science B.V. All tights reserved.