The isomerization of 1-penten-3-ol into 3-pentanone catalyzed by [RuCp(H2O-κO)(PTA)2](CF3SO3) (1CF3SO3) (PTA = 1,3,5-triaza-7-phosphaadamantane) was studied and two water-soluble ruthenium catalyst reaction intermediates were characterized. The main intermediate, the complex [RuCp(exo-η2-1-penten-3-ol)(PTA)2](CF3SO3)·2H2O (exo-2CF3SO3·2H2O), was isolated and characterized by NMR in solution and by single-crystal X-ray diffraction in the solid state, constituting the first example of a fully characterized complex containing a coordinated η2-allylic alcohol and the first crystal structure for a water-soluble metal complex containing a η2-allyl ligand. NMR and Eyring analysis show the crucial involvement of water molecules both in the transformation of allylic alcohol into a ketone as well as in the concomitant isomerization of the exo-coordinated substrate into the endo-conformer. DFT structure and bonding analyses are used to assess the relative stabilities of the isomers and how the metal drives the electronic distribution on the substrate.