Ion pairing of [H3Ru4(CO)12]− with the quaternary ammonium groups of water‐soluble poly(diallyldimethylammonium chloride) gives the precursor of a nanocatalyst for hydrogenation and transfer hydrogenation reactions in water. In hydrogenation reactions, “on water” effect is seen for substrates such as cyclohexanones, methyl pyruvate, acetophenone, and safflower oil. With these substrates, higher turnover numbers are obtained in water than in methanol. The cluster‐derived catalyst shows unique chemoselectivity, which is not seen either in a catalyst prepared through ion pairing of [RuCl4]− with the quaternary ammonium groups of the same polymer or in commercial (5 %) Ru/Al2O3. In contrast to Ru/Al2O3, the [RuCl4]−‐derived catalyst, or many other ruthenium‐based catalytic systems, the cluster‐derived catalyst is totally inert toward the hydrogenation of NO2, CN, and aromatic ring functionalities. In water, typical ketones and aldehydes could be reduced by using the cluster‐derived catalyst and formate as the hydrogen donor. Industrially important cyano‐ and nitrobenzyl alcohols could thus be made from the corresponding aldehydes. High‐resolution TEM data suggest that unique chemoselectivity is a result of highly crystalline ruthenium nanoparticles that consist mainly of Ru(1 1 1) crystal planes.