In situ XANES and EXAFS were used to uncover the oxidation state of the metal constituents in a 5 wt% Pd/Al2O3 and a 0.75 wt% Bi-5 wt% Pd/Al2O3 catalyst during the liquid-phase dehydrogenation and oxidation of 1-phenylethanol. The catalytic reactions were carried out in a continuous-flow fixed-bed reactor serving at the same time as a spectroscopic cell for XANES/EXAFS. A special technique was applied to deposit Bi mainly as adatoms onto the supported Pd particles, as evidenced by XPS and XAS. Due to this technique, most Bi atoms were located on the Pd surface and thus the Bi dispersion was higher than that of Pd. This feature of the bimetallic catalysts led to more pronounced changes in the XANES region at the Bi L3- than at the Pd K-edge. As a result, the method was more surface sensitive to the minor component Bi than to the major component Pd. The studies revealed that both the active sites (Pd) and the promoter (Bi) were in a metallic state during dehydrogenation in He. After the introduction of molecular oxygen the metals remained in a reduced state as long as the oxygen supply was limiting the global reaction rate, indicating a dehydrogenation mechanism of alcohol oxidation. As soon as the rate of oxygen supply exceeded the rate of alcohol dehydrogenation, both Bi and Pd were successively oxidized, leading to the well-known "overoxidation" (deactivation) phenomenon. An important consequence of the observations to the reaction mechanism is that the promoter effect of Bi cannot be related to its (partially) oxidized state (Bin+), or to Bi leaching and homogeneous catalysis. (C) 2003 Elsevier Inc. All rights reserved.