Selective recovery of palladium from an industrial wastewater including a large amount of iron was studied by liquid surfactant membranes (LSMs) prepared with a sulfur-containing extractant as a carrier in a stirred cell. The extraction behavior of palladium and iron ions in liquid-liquid extraction was also investigated in order to choose an appropriate carrier for the LSM operations. Palladium ions were found to be extracted selectively over iron ions by using the sulfur-containing extractant from an acidic aqueous solution. The effects of several chemical species and operation factors on the recovery of palladium by LSMs were systematically examined with several kinds of sulfur-containing carriers and thiourea as a stripping reagent. The selection of carrier is a key factor for designing an efficient recovery process of palladium with an LSM technique. Di-2-ethylhexyl monothiophosphoric acid (commercial name MSP-8) appears to be one of the best carriers currently available for palladium recovery using the LSM technique. Recovery of more than 95% palladium from a pseudoindustrial wastewater could be attained in a few minutes under optimum conditions.