The performance of silica supported Pd-Cu composite catalyst developed previously for direct oxidation of benzene to phenol has been improved by changing the copper ion source from Cu(II) sulfate to Cu(II) phosphate and by additional impregnation of phosphoric acid. The reaction proceeds under the simultaneous feeding of benzene, hydrogen and oxygen at 200-degrees-C with a rate of phenol production ca. 0.4 mmol h-1 (g-cat)-1, which is ten times greater than that we have reported previously with a catalyst prepared from Cu(II) sulfate. With this catalyst, complete oxidation to carbon dioxide is also retarded to increase the selectivity of phenol. The improvement of catalytic activity arises apparently from the diminution of the yield of water and is ascribed to the presence of a thin liquid film over the silica surface.