For applications in aqueous media, sulfonated tetrahydrosalen (sulfosalan, HSS) was synthesized by sulfonation of tetrahydrosalen in fuming sulfuric acid. The Pd(II) complex of this ligand, [Pd(HSS)], showed outstanding activity in hydrogenation and redox isomerization of allylic alcohols in homogeneous aqueous solutions or in aqueous−organic biphasic systems (for oct-1-en-3-ol TOF(hydrogenation) = 1580 h −1 , TOF(redox isomerization) = 400 h −1 ). DFT calculations revealed that H 2 is activated heterolytically, resulting in a Pd(II)−hydride complex, [Pd(H)(HSS-Hphen)], in which one of the phenolate oxygens is protonated. Both hydrogenation and redox isomerization take place via concerted transfer of a proton and a hydride from the hydrogenated catalyst to the allylic alcohol.