The complex [PdCl2(dppp)] catalyses the copolymerisation of CO-ethylene when employed in a mixture of methanol and water as solvent. In the absence of H2O, it is inactive and at the end of the experiment, formation of metallic palladium has been noted. A sharp increase in the activity occurs at a water concentration above 5%, to reach a maximum of 4100 g copolymer/(g Pd h) by increasing the content of H2O UP to 20% (mol/mol). In AcOH as solvent the catalytic activity of [PdCl2(dppp)] is also strongly dependent on the content of H2O. In the absence of H2O it is inactive, though it does not decompose to palladium metal. Upon addition of H2O, it turns into a highly active system and the catalytic activity passes through a maximum of ca. 28 000 h(-1) when the molar ratio H2O/AcOH = 55%. The C-13 NMR spectra show that the polymer chain is perfectly alternated. Polyketones obtained in MeOH-H2O (molecular weight ca. 6.5 x 10(3) g/mol) are of three types, differing for the nature of end-groups H(CH2CH2CO)(n)OMe, MeOCO(CH2CH2CO)(n)OMe and H(CH2CH2CO)(n)CH2CH3. In AcOH-H2O, only one type of polyketone forms having ketonic end-groups (average molecular weight ca. 2.7 x 10(4) g/mol). On the basis of these experimental evidences, a mechanism for their formation is proposed. It is also proposed that the main role of H2O is that of forming an active Pd-H species which would start the catalysis upon interaction with CO through a reaction closely related to the water gas shift reaction (WGSR) (during the catalysis there is formation of CO2 in significant amounts). It is also proposed that the main role of acid is that of stabilizing Pd-H active species preventing their deprotonation to inactive species. (C) 2004 Elsevier B.V. All rights reserved.