Polyvinylpyrrolidone-stabilized Rh nanoparticles (RhNPs/PVP) of ca. 2.2 nm in size were prepared by the hydrogenation of the organometallic complex [Rh(η3-C3H5)3] in the presence of PVP and evaluated as a catalyst in the hydrogenation of a series of arene substrates as well as levulinic acid and methyl levulinate. The catalyst showed excellent activity and selectivity towards aromatic ring hydrogenation compared to other reported transition metal-based catalysts under mild reaction conditions (room temperature and 1 bar H2). Furthermore, it was shown to be a highly promising catalyst for the hydrogenation of levulinic acid and methyl levulinate in water leading to quantitative formation of the fuel additive γ-valerolactone under moderate reaction conditions compared to previously reported catalytic systems.