TiO2 hollow spheres, TiO2−x hollow spheres, and a series of Pd/TiO2 and Pd/TiO2−x hollow spheres with different Pd mass fractions were successfully synthesized by a template-based and NaBH4 reduction method. The as-synthesized catalysts are hollow sphere structures that provide a large number of active sites for photocatalytic reactions. The synergistic effect of Pd nanoparticles (NPs) and oxygen vacancy facilitated photogenerated charge transportation and separation. In particular, the optimized 4 wt% Pd/TiO2−x shows an excellent conversion (88.3%) for the photocatalytic selective oxidation of benzyl alcohol (BA) under visible light. In addition, it was observed that the catalyst had high stability and recyclability under the study conditions. The band structure, density of states and the charge difference distribution were calculated with density functional theory (DFT) methods to deeply reveal that the synergistic effect of oxygen vacancies and Pd NPs to enhance the photocatalytic performance. Consequently, a possible photocatalytic reaction mechanism has also been put forward based on the DFT and experimental results.