A palladium-modified functionalized cyclodextrin (DACH-Pd-β-CD) catalytic system was synthesized and characterised. It showed high catalytic performance in the reduction of different nitroarenes to the corresponding anilines with the presence of sodium borohydride in water at room temperature. The yields of the desired products are up to 99%. Furthermore, the catalyst can be easily separated and still could maintain high catalytic activity after five cycles and no leaching of Pd into solution occurred.