Pd membranes can be applied to many hydrogenation or dehydrogenation reactions for chemical production. Such membrane reactors can realize the simultaneous separation and reaction in one unit. However, the Pd membrane is easily poisoned by hydrocarbons or other impurities at high temperatures and itself does not provide sufficient catalytic efficiency. To overcome these problems, here we report a novel bifunctional titanium silicalite (TS) zeolite modified Pd capillary membrane microreactor for one-step hydroxylation of benzene to phenol. Using the state of art technology to uniformly anchor the monolayer of TS nanoparticles on the Pd membrane is still a challenge. In this work, the TS nanoparticles were attached the Pd membrane surface via a novel and efficient covalently bonding method using alkoxysilane linkers. The effects of various Pd membranes with different TS zeolite loading on the reaction efficiency and long-term stability were investigated. The benzene conversion and phenol yield could be dramatically increased by applying the TS nanoparticles as the catalyst compared to the blank Pd membranes. A maximum benzene conversion of 23.4% and phenol yield of 22.3% were achieved at 473 K and 100 kPa, much higher than that typically reported in Science (Niwa et al., 2002) with the benzene conversion and phenol yield of 13.3% and 11.3%, respectively. The TS zeolite modified Pd membranes also displayed good stability for low temperature separation and reaction during 110-h long-term-test at 473 K and 100 kPa. The deposited uniform TS catalyst in a monolayer not only provides good catalytic properties to improve reaction efficiency but also works as the diffusion barrier to protect the Pd membrane by avoiding the direct contact of the hydrocarbon molecules and Pd surface. The possible reaction pathway for TS zeolite modified Pd membrane microreactor for the direct benzene conversion to phenol was also elucidated.