A variety of readily available 1-mercapto-3-yn-2-ols 5 were conveniently converted into the corresponding thiophenes 6 in good to high yields in MeOH as the solvent at 50-100 °C in the presence of catalytic amounts (1-2%) of PdI(2) in conjunction with KI (KI:PdI(2) molar ratio = 10). The catalyst could be made recyclable employing an ionic liquid, such as BmimBF(4), as the solvent under suitable conditions.