In aqueous medium without any other additives, palladium (Pd) nanoparticles with water‐soluble polyvinyl alcohol (PVA) as stabilizer were synthesized for the catalytic hydrogenation of nitrobenzene. Under the optimum experimental conditions, the nitrobenzene conversion and the selectivity for aniline were 99.3 % and 100 %, respectively. Comprehensive characterization methods, including TEM, UV/Vis, confocal laser scanning microscopy (CLSM), XRD and XPS allowed a better understanding of the role of PVA aggregates and the properties of Pd nanoparticles. The nitrobenzene conversion exceeded 80 % even after 6 cycles without any treatment of the catalyst. A mechanism about the hydrogenation of nitrobenzene catalyzed by Pd/PVA system was proposed. The Pd/PVA catalyst also exhibited excellent activity and selectivity, particularly to ortho‐fluoronitrobenzene and ortho‐nitrotoluene. This research can provide a reference for the environmentally friendly catalysis for hydrogenation of nitrobenzene and other substituted nitrobenzene compounds.