Diclofenac is one of the most commonly detected pharmaceuticals in wastewater treatment plant (WWTP) effluents and the receiving water bodies. In this study, biogenic Pd nanoparticles (‘bio-Pd’) were successfully applied in a microbial electrolysis cell (MEC) for the catalytic reduction of diclofenac. Hydrogen gas was produced in the cathodic compartment, and consumed as a hydrogen donor by the bio-Pd on the graphite electrodes. In this way, complete dechlorination of 1 mg diclofenac l−1 was achieved during batch recirculation experiments, whereas no significant removal was observed in the absence of the biocatalyst. The complete dechlorination of diclofenac was demonstrated by the concomitant production of 2-anilinophenylacetate (APA). Through the addition of −0.8 V to the circuit, continuous and complete removal of diclofenac was achieved in synthetic medium at a minimal HRT of 2 h. Continuous treatment of hospital WWTP effluent containing 1.28 µg diclofenac l−1 resulted in a lower removal efficiency of 57%, which can probably be attributed to the affinity of other environmental constituents for the bio-Pd catalyst. Nevertheless, reductive catalysis coupled to sustainable hydrogen production in a MEC offers potential to lower the release of micropollutants from point-sources such as hospital WWTPs.