alpha-Hydroxylation of 1,3-dicarbonyl compounds was successfully catalyzed by carbon-stabilized polymer-incarcerated gold nanoclusters (PI/CB-Au). The reaction proceeded under mild conditions using molecular oxygen as oxidant with wide substrate scopes and the catalyst could be recovered and reused by a simple operation. The control experiments and the reaction monitoring revealed that alpha-peroxide compounds were reaction intermediates, and PI/CB-Au also catalyzed isomerization.