A palladium-based catalytic system is highly active in the synthesis of gamma-keto acids of type ArCOCH2CH2COOH via carbonylation-decarboxylation of the corresponding alpha-chloride. Typical reaction conditions are: P(CO) = 20-30 atm; substrate/H2O/Pd = 100-400/800-1000/1 (mol); temperature: 100-110-degrees-C; [Pd]=0.25 X 10(-2)-1 X 10(-2) M; solvent: acetone; reaction time: 1-2 h. A palladium(II) complex can be used as catalyst precursor. Under the reaction conditions above, reduction of the precursor to palladium metal occurs to a variable extent. High catalytic activity is observed when the precursor undergoes extensive decomposition to the metal. Pd/C is also highly active. Slightly higher yields are obtainable when the catalytic system is used in combination with a ligand such as PPh3. A mechanism for the catalytic cycle is proposed: (i) The starting keto chloride undergoes oxidative addition to reduced palladium with formation of a catalytic intermediate having a Pd-[CH(COOH)CH2COPh] moiety. The reduced palladium may be the metal coordinated by other atoms of palladium and/or by carbon monoxide and/or by a PPh3 ligand when catalysis is carried out in the presence of this ligand. It is also proposed that the keto group in the beta-position with respect to the carbon atom bonded to chlorine weakens the C-Cl bond, easing the oxidative addition step and enhancing the activity of the catalyst. (ii) Carbon monoxide 'inserts' into the Pd-C bond of the above intermediate to give an acyl catalytic intermediate having a Pd-[COCH(COOH)CH2COPh] moiety. (iii) Nucleophilic attack of H2O to the carbon atom of the carbonyl group bonded to the metal of the acyl intermediate yields a malonic acid derivative as product intermediate. This, upon decarboxylation, gives the final product. Alternatively, the desired product may form without the malonic acid derivative intermediate, through the following reaction pathway: the acyl intermediate undergoes decarboxylation with formation of a different acyl intermediate, having a Pd-[CO-CH2CH2COPh] moiety, which, upon nucleophilic attack of H2O on the carbon atom of the carbonyl group bonded to the metal, yields the final product.