Allyl alcohol is produced in simple and economical fashion from propylene and oxygen by reacting propylene, oxygen and acetic acid over a palladium-containing catalyst in the presence of water; condensing the reaction product to form a condensate containing allyl acetate, acetic acid and water; treating the condensate with an acid catalyst and separating the resulting product by distillation into a head product consisting essentially of an allyl acetate/allyl alcohol/water azeotrope and into a sump product consisting essentially of acetic acid, allyl alcohol and water; recycling the head product to the acid catalyst stage; separating the sump product in a second distillation into an allyl alcohol/water head product and into a second sump product consisting essentially of acetic acid and water and recycling this sump product to the initial reaction.