This paper deals with the occurrence of quasi two-dimensional palladium nanoparticles (hcp structure, 53 nm in average lateral dimension, approx. 37 wt% Pd) encapsulated into graphite. Microphotographs showed that the nanoparticles occurred in the interlayer spacing of graphite. Raman spectroscopy of Pd-graphite showed absolutely no charge-transfer interaction between Pd nanoparticles and the carbon lattice. The Pd nanoparticles proved to be active catalysts for the Heck reaction. In this test reaction a halobenzene reacts with styrene to form diphenylethene (stilbene). Although no interaction between nanoparticles and the carbon lattice occurs, the nanoparticles remain inside the carbon lattice after the Heck reaction. They could be not washed out; therefore, the catalyst is stable. (C) 2000 Academic Press.