The new water-soluble phosphine complexes of rhodium(III), [RhI4(mtpa)(2)]I (1), and ruthenium(II), [RuI4(mtpa)(2)]. 2H(2)O (2) and [RuI2(mtpa)(3)(H2O)]I-3.2H(2)O (3) (mtpa = 3,5-diaza-1-methyl-1-azonia-7-phosphatricyclo[3.3.1.1(3,7)]decane cation), have been prepared in the reactions of RhCl3.3H(2)O and RuCl3.3H(2)O in water in the presence of phosphine and potassium iodide. Properties and reactivity of the complexes have been investigated using H-1 and P-31 NMR and IR spectroscopies. The complexes have also been structurally characterized by single crystal X-ray diffraction studies. The compounds [RhI4(mtpa)(2)]I and [RuI4(mtpa)(2)].2H(2)O are zwitterionic octahedral complexes. The compounds were tested as catalysts for two-phase hydroformylation of 1-hexene and hydrogenation of cinnamaldehyde. Complex 1 is a selective catalyst for reduction of the C=C bond while complexes 2 and 3 selectively hydrogenate the C=O bond.