An aqueous phase Pd nanoparticles (NPs) system reduced and stabilized only by sodium lignosulfonate (SLS) was found to exhibit a favorable catalytic performance in hydrodeoxygenation of vanillin to produce 2-methoxy-4methylphenol (MMP). Ultraviolet-visible spectroscopy (UV-Vis), transmission electron microscope (TEM), Xray diffraction (XRD), X-ray photoelectron spectroscopy (XPS) and Fourier transform infrared (FT-IR) characterization were carried out to confirm the formation of NPs, and the influence of various metal salt precursors, temperatures, stirring rates and SLS concentrations on catalyst preparation. It was revealed that the optimized Pd NPs with an average diameter of 14.63 nm had achieved a 99.8 % vanillin conversion and a 98.6 % MMP selectivity under the conditions of 1 mmol vanillin, n(Vanillin)/n(Pd) = 300, 1 MPa H2, 70 degrees C and 2 h. Besides, MMP, the target product, was found an auto-separation property from the aqueous catalyst system due to its less solubility in water. Furthermore, this aqueous Pd NPs catalyst was demonstrated to have stable catalytic activity in the hydrodeoxygenation of vanillin by ten-run tests with favorable conversions of vanillin above 98 %. The selectivity of MMP stayed above 92 % within five runs and still maintained 85.4 % after ten runs. Thus, an environmentally friendly and mild-conditioned hydrodeoxygenation method of vanillin into MMP was developed by using SLS, one of the by-products of the pulp and paper industry.