A strategy involving the decomposition of palladium(II) organometallic complexes with sulfonated N-heterocyclic carbene ligands leads to the formation of stable and water-soluble Pd nanoparticles. Three different methodologies (thermal decomposition, reduction under CO atmosphere, and reduction with H ) gave particles with different shapes and sizes, ranging from 1.5 to 7 nm. The structures of the organometallic intermediates and organic decomposition products were elucidated by NMR spectroscopy. To check the accessibility of the surface, the nanoparticles were tested as catalysts for the chemoselective hydrogenation of styrene in water. An effect of the particle size on the catalyst activity was observed. The aqueous phase was recycled up to ten times without any precipitation of metallic palladium.