The water-soluble diphosphine (NaO3S(C6H4)CH2)(2)C(CH2PPh2)(2) (Na2DPPPDS) was employed to prepare the bis-trifluoroacetate Pd(II) complex Pd(Na2DPPPDS)(CO2CF3)(2). 2THF (1). The catalytic performance of 1 in the co- and terpolymerization of CO and ethene and propene in water has been studied in different experimental conditions. In combination with both a protic acid, commonly p-toluenesulfonic acid, and an organic oxidant such as 1,4-benzoquinone, 1 forms the most efficient catalyst systems ever reported for the copolymerization of CO and ethene in water. Under comparable conditions, the activity of 1 is similar to that of the industrial Pd(II) 1,3-bis(diphenylphosphino)propane catalysts in MeOH. Unlike the latter which yield a mixture of copolymers bearing diketone, keto-ester, or diester end groups, the copolymers and terpolymers produced with the Na2DPPPDS-based catalysts have exclusively ketonic end groups for average molecular weights ranging from 10 to 30 kg mol(-1) depending on the reaction conditions. In situ high-pressure NMR (HPNMR) studies have been performed in actual copolymerization conditions using D2O as solvent. The only palladium complex visible on the NMR time scale contains the diphosphine ligand and TsO- or water groups. It is suggested that this palladium complex acts as a reservoir of "(diphosphine)Pd(II)" moieties which are delivered into the catalysis cycle as Pd-H species by reaction with water and/or H+. A catalysis cycle is proposed on the basis of HPNMR experiments, the structure of the copolymers, and the occurrence of the water-gas-shift reaction.