Studies on the sp-sp intermolecular coupling reactions with the palladium water-soluble catalyst prepared in situ from palladium(II) acetate and sulfonated triphenylphosphine P(C6H4-m-SO3Na)(3) (TPPTS) in a homogeneous acetonitrile-water system, without Cu(I) promotor, afford diynes with moderate yields (45-65%). Under the same conditions, the sp(2)-sp coupling of 2-iodophenols or 2-iodoanilines and terminal alkynes followed by intramolecular cyclization gives indolic and furanic products in good yields (60-99%). Under these aqueous conditions, an efficient and short synthesis of eutypine illustrated the synthetic potentiality of the coupling. Furthermore, through a series of kinetic and P-31 NMR experiments, we have demonstrated that a mixture of Pd(OAc)(2) and TPPTS affords spontaneously a palladium(0) complex, through formation of bivalent complex Pd(OAc)(2)-(TPPTS)(2). A detailed mechanism of the reaction has been investigated thoroughly and the pertinent rate constants measured. The resulting palladium(0) complex reacts with phenyl iodide via an oxidative addition. This complex is considerably less reactive than the corresponding complex generated from PPh(3), probably due to steric effects.