Abstract. A spatially heterogeneous reaction-diffusion system modelling predator-prey interaction is studied, where the interaction is governed by a Holling type II functional response. Existence of multiple positive steady states and global bifurcation branches are examined as well as related dynamical behavior. It is found that while the predator population is not far from a constant level, the prey population could be extinguished, persist or blow up depending on the initial population distributions, the various parameters in the system, and the heterogeneous environment. In particular, our results show that when the prey growth is strong, the spatial heterogeneity of the environment can play a dominant role for the presence of the Allee effect. Our mathematical analysis relies on bifurcation theory, topological methods, various comparison principles and elliptic estimates. We combine these methods with monotonicity arguments to the system through the use of some new auxiliary scalar equations, though the system itself does not keep an order structure as the competition system does. Among other things, this allows us to obtain partial descriptions of the dynamical behavior of the system.