We investigate the molecular environment of the Galactic supernova remnant (SNR) Kesteven 78 and perform an XMM-Newton X-ray spectroscopic study for the northeastern edge of the remnant. SNR Kes78 is found to interact with the molecular clouds (MCs) at a systemic local standard of rest velocity of 81km/s. At around this velocity, the SNR appears to contact a long molecular strip in the northeast and a large cloud in the east as revealed in the 13CO line, which may be responsible for the radio

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... ightness peak and the OH maser, respectively. The 12CO-line bright region morphologically matches the eastern bright radio shell in general, and the SNR is consistent in extent with a CO cavity. Broadened 12CO line profiles discerned in the eastern maser region and the western clumpy molecular arc and the elevated 12CO J=2-1/J=1-0 ratios along the SNR boundary may be signatures of shock perturbation in the molecular gas. The SNR-MC association places the SNR at a kinematic distance of 4.8 kpc. The X-rays arising from the northeastern radio shell are emitted by underionized hot ( 1.5 keV), low-density ( 0.1 cm^-3) plasma with solar abundance, and the plasma may be of intercloud origin. The age of the remnant is inferred to be about 6 kyr. The size of the molecular cavity in Kes78 implies an initial mass around 22Msun for the progenitor.