Fe2O3 was modified by doping Ni and Pd to obtain 3%Ni-1.5%Pd/Fe2O3HT catalyst via the hydrothermal process for selective hydrogenation of citral to nerol and geraniol. This catalyst was prepared by different techniques like co-precipitation, wet impregnation, and hydrothermal process, and their activity towards citral hydrogenation was thoroughly studied. The prepared catalysts were thoroughly characterized. Various parameters such as pressure, temperature, reaction time, and metal weight (%) have been optimized through the RSM-BBD module to attain high selectivity towards nerol and geraniol. The optimal reaction conditions of 6.45 bar pressure, 3%Ni-1.5%Pd loading at 72.1 °C for 84 min, the citral (>99%) was converted to nerol/geraniol with 97.2% of selectivity. The modified catalyst activated the oxygen species of the carbonyl atom and thus favours the selective hydrogenation of the CO bond without reducing the CC bond. This process is very effective for the selective transformation of citral (75%) in lemongrass essential oil to organoleptically superior nerol/geraniol-rich oil using 3%Ni-1.5%Pd/Fe2O3HT catalyst.