Dendrimer-encapsulated Pd(0) nanoparticles inside poly(propylene imine) (PPI) dendrimers functionalized with triethoxybenzamide groups have been prepared by extraction of Pd2+ and subsequent chemical reduction. The resulting dendrimer-Pd nanocomposites are unique catalysts for substrate-specific hydrogenation of polar olefins, due to the strong interaction between polar substrates and tertiary amino groups within the dendrimers.