The diazomethane-mediated cyclopropanation of cyclohexenone using Pd(OAc) 2 and different sources of Pd(0) species as precatalysts has been studied. In the presence of an excess of diazomethane, Pd-(OAc) 2 rapidly evolves to the formation of palladium nanoparticles (less than 1 min), which are active as catalysts in the cyclopropanation process. The nature of these particles has been analyzed through transmission electron microscopy showing a size distribution between 6 and 40 nm. These nanoparticles generated in situ are more active man Pd(0) complexes, preformed nanoparticles, and commercial palladium powder. Cyclic voltammetry measurements of the reaction solution after completion show the presence of Pd(0) species. This is the first time that Pd(0) nanoparticles are evidenced in a cyclopropanation reaction. Moreover, the reduction of Pd(OAc) 2 to Pd(0) in the presence of diazomethane has been theoretically studied through density functional calculations. The formation of methyl and allyl acetates as organic byproducts has been predicted by the theoretical calculations, and these species, as well as oligomers derived from them, have been detected by spectrometric and spectroscopic techniques (MS, NMR, and IR). © 2007 American Chemical Society.