The reactivity of palladium complexes of bidentate diaryl phosphane ligands (P2) was studied in the reaction of nitrobenzene with CO in methanol. Careful analysis of the reaction mixtures revealed that, besides the frequently reported reduction products of nitrobenzene [methyl phenyl carbamate (MPC), N,N′-diphenylurea (DPU), aniline, azobenzene (Azo) and azoxybenzene (Azoxy)], large quantities of oxidation products of methanol were co-produced (dimethyl carbonate (DMC), dimethyl oxalate (DMO), methyl formate (MF), H2O, and CO). From these observations, it is concluded that several catalytic processes operate simultaneously, and are coupled via common catalytic intermediates. Starting from a P2Pd0 compound formed in situ, oxidation to a palladium imido compound P2PdIINPh, can be achieved by de-oxygenation of nitrobenzene 1) with two molecules of CO, 2) with two molecules of CO and the acidic protons of two methanol molecules, or 3) with all four hydrogen atoms of one methanol molecule. Reduction of P2PdIINPh to P2Pd0 makes the overall process catalytic, while at the same time forming Azo(xy), MPC, DPU and aniline. It is proposed that the Pd–imido species is the central key intermediate that can link together all reduction products of nitrobenzene and all oxidation products of methanol in one unified mechanistic scheme. The relative occurrence of the various catalytic processes is shown to be dependent on the characteristics of the catalysts, as imposed by the ligand structure.