Dihydroxylation of styrene to I-phenyl-l,2-dihydroxyethane is studied using iodosyl benzene as an oxidant and various modified bentonite clays (I M-H-clay; proton exchange; Fe-exchanged clay; and Mn(III)-salen-exchanged clay) as catalyst. Catalytic activity was found to be higher for Fe-exchanged clay for intermediate epoxide formation. Studies clearly show that free Fe(III) species present in the interlayer space are responsible for its reactivity. The intermediate epoxide is converted to 1-phenyl-1,2-dihydroxy-ethane by Bronsted acidity of the clay and the water present in the reaction media.