A mild and robust heterogeneous palladium-catalyzed CO bond cleavage of 2-aryloxy-1-arylethanols using formic acid as reducing agent in air was developed. The cleaved products were isolated in 92–98 % yield; and by slightly varying the reaction conditions, a ketone, an alcohol, or an alkane can be generated in near-quantitative yield. This reaction is applicable to cleaving the β-O-4′-ether bond found in lignin polymers of different origin. The reaction was performed on a lignin polymer model to generate either the monomeric aryl ketone or alkane in a quantitative yield. Moderate depolymerization was achieved with native lignin at similar reaction conditions. Mechanistic studies under kinetic control indicate that an initial palladium-catalyzed dehydrogenation of the alcohol is followed by insertion of palladium to an enol equivalent. A palladium–formato complex reductively cleaves the palladium–enolate complex to generate the ketone.