The possibility of recovering useful hydrocarbons from oil palm waste derived lignocellulose (palm shell oil) using steam tolerant catalysts was investigated. The examined catalysts were rare earth metal exchanged Y-type (REY) zeolites, nickel supporting REY zeolites and FeOOH catalysts. It was found that palm shell oil could be converted to a mixture which mainly contains phenol, acetone and butanone without hardly generating solid residues when a FeOOH catalyst was used. Therefore, by catalytic reaction, this waste-derived material may become a new and abundant chemical source. The catalytic activity of this FeOOH catalyst can be enhanced by supporting ZrO2 on it. It was found that oxygen transfer during reaction occurs mainly from H2O to the products, not from the oxygen of the catalyst. It is assumed that the supported ZrO2 plays a role of the decomposition of H2O adsorbed on the catalyst, yielding active hydrogen and oxygen species, which is also supported by the results of thermal desorption spectra and Mossbauer spectroscopy analysis of the catalyst.