A series of water-soluble Rh(I) mononuclear complexes of general formula: [Rh(sulphsal-X-R)(COD)] [sulphsal = sulphonated salicylaldimine, COD = cyclooctadiene; where R = H, Cl, CH₃ and X = H, ^tBu] have been synthesized. All the compounds were characterised using various spectroscopic and analytical techniques such as nuclear magnetic resonance spectroscopy, infrared spectroscopy, single crystal X-ray diffraction (for complex 10) and mass spectrometry. All the compounds display excellent water-solubility at room temperature and were tested as catalyst precursors in the aqueous biphasic hydroformylation of 1-octene. The catalysts could be easily recovered by phase separation and were used up to 5 times without any significant loss in activity and 1-octene conversion. Very high yields of the expected aldehydes were obtained without addition of any phase transfer agents, co-solvents or hydrophobic ligands. Excellent aldehyde chemoselectivity is observed for all the catalysts but this varied each time the catalysts were recycled, with the formation of a small amount of internal olefins. ICP-OES and mercury poisoning experiments show that a combination of homogeneous catalysis and catalysis mediated by nanoparticles is taking place in these systems.