Liquid-phase oxidation of benzene or toluene with oxygen (100-140 degreesC, 5-10 atm, in AcOH-H2O) catalysed by the Pd(OAc)(2)-H-5[PMo10V2O40] redox system leads mainly to oxidative coupling (biphenyl and terphenyl or bitolyl) and ring hydroxylation (phenol or cresol). The reaction has been carried out homogeneously (at [H2O] < 15 vol.% in the solvent) and in biphasic conditions including an arene phase and an AcOH-H2O catalyst phase (at [H2O] >15 vol.%). The biphasic oxidation using AcOH-H2O 80:20 (v/v) as the solvent has been found to be more efficient towards the oxidative coupling than the homogeneous system (AcOH-H2O 95:5 (v/v)) in terms of both catalytic activity and selectivity to biaryls. Increasing the H2O/AcOH ratio in the solvent (up to AcOH-H2O 30:70 (v/v)) greatly enhances the ring hydroxylation to form phenol with 64% selectivity at 6% benzene conversion (100 degreesC, 5 atm O-2, 2 h). (C) 2002 Elsevier Science B.V. All rights reserved.