The purpose of this study was to clarify the cause of high catalytic activity of a third phase in a phase transfer catalysis system. The halogen substitution reaction between benzyl chloride in an organic phase and potassium bromide (KBr) in an aqueous phase was carried out. The conditions of formation of the third phase were searched by changing the kinds of phase transfer catalysts, organic solvents and the concentration of KBr in an aqueous phase. When tetrabutylammonium bromide was used as a phase transfer catalyst, a third phase was formed with both dodecane and toluene as organic solvents. On the other hand, when tetrapentylammonium bromide was used as a catalyst, a third phase was formed with dodecane but not with toluene. The distributions of catalysts, benzyl bromide and Br-among phases were measured. Based on the results, the place where the reaction occurred could be classified into three types, that is, in an organic phase (type I), at the interface between an organic phase and an aqueous phase (type II) and in a third phase (type III). The reaction rate of type III was the largest because of high concentration of both reactants in a third phase. The reaction rate varied with the kinds of third phase significantly. This variation could be explained by a difference in the concentration of benzyl chloride in the third phase. The rate constant of the first-order kinetics was, however, independent of the kinds of third phase. This value agreed with that of an organic phase of type I. Repeated use of a third phase was also studied to apply phase transfer catalysts to industrial purpose. After the reaction was completed, an organic phase containing a product was removed and a new organic phase containing a reactant was charged. By repeating this operation, the third phase could be reused without any loss of its catalytic activity.