A cationic 2,2′-bipyridyl palladium(II)/CuI system was proven to be a reusable and highly efficient catalyst for the homocoupling of terminal alkynes at room temperature using water as a solvent in the presence of TBAB under aerobic conditions. For aromatic terminal alkynes, the reaction was performed either with or without I2 as an oxidant; the addition of I2 was required when aliphatic terminal alkynes were used as a substrate for the homocoupling reaction. In the presence of 0.0001–1 mol% palladium catalyst and 1 mol% CuI, a variety of terminal alkynes were homocoupled in good to excellent yields. The water-soluble catalytic system was separated from the organic products by extraction and the residual aqueous solution showed activity for reuse for several cycles without a significant decrease in activity.