Palladium complexes present in PdCl2 aqueous solutions of various acidity have been introduced into polyaniline in the polyemeraldine base form (PANI). In these acidic media polyemeraldine undergoes protonation as evidenced by various spectroscopic methods, including FTIR, ESCA, and UV/vis. Additionally in the PdCl2 solutions of low acidity a partial reduction of Pd2+ ions to Pd-0 takes place with concomitant oxidation of polyemeraldine towards polypernigraniline. In the highly acidic PdCl2 solutions there are spectroscopic indications of the formation of a coordination bond between palladium ions and nitrogen atoms of polyaniline. PANI containing palladium exhibits catalytic activity in 2-ethylanthraquinone (eAQ) liquid phase hydrogenation which results in the reduction of >C=O to greater than or equal to C-OH groups as well as in hydrogenation of aromatic rings in eAQ.