The catalyst system consisting of Pd, transition metal-modified ZrO2 and acetic acid was found to catalyze the hydroxylation of benzene with molecular oxygen without hydrogen and phenol was formed. Of transition metals employed, only vanadium additive was found to be effective for improving the rate of phenol formation as well as the selectivity, while any other transition metals such as iron, molybdenym, tungsten and yttrium were not promotive. Support effects on vanadium were in the order: V/ZrO2> V/Al2O3> V/SiO2. The highest rate of phenol formation was obtained at 0.5wt%V/ZrO2 catalyst. Phenol selectivity was dramatically improved by the addition of sulfolane, while benzene conversion and STY of phenol formation decreased. It is assumed that Pd(II) and Pd(IV) intermediates derived from acetic acid, oxygen and palladium acetate could play an important role in hydroxylation of benzene.