Solar‐driven hydrogen (H2) evolution combined with synchronously selective oxidation for fine chemicals production is of great significance in energy and synthetic chemistry. Herein, ultrafine Pd nanoparticles‐encapsulated MIL‐100(Fe) (Pd‐MOF‐Fe) nanocomposites are synthesized through double‐solvent impregnation integrated with photo‐reduction method. Integrating MOF‐based catalysis and Pd‐based catalysis, the Pd‐MOF‐Fe can serve as multifunctional catalyst for photoinduced alcohol dehydrogenation reaction. Optimal generation rates of H2 (3.61 mmol g−1 h−1) and benzaldehyde (3.40 mmol g−1 h−1) are gained over Pd‐MOF‐Fe, ca. 4.1 times that of the Pd/MOF‐Fe, in which Pd crystals with size ranging from 3 to 6 nm are immobilized on the intersurface of MOFs. Besides, controlled experiments reveal the pivotal role of the opened FeO6 nodes of MIL‐100(Fe) as Lewis acid sites toward alcohol activation. This work provides a controllable approach for metal nanoparticle immobilization. Furthermore, considering the diversified MOF structures, this study also highlights the infinite possibility of metal nanoparticle/MOFs as multifunctional platform for solar energy conversion and chemicals production.