In developing environmentally benign chemistries, it is most important to use dioxygen directly in lieu of toxic and/or corrosive stoichiometric oxidants. Unfortunately, for many processes such direct oxidations have not yet become practical. To help develop such processes, we elucidate here the mechanism for the reaction of molecular oxygen with toluene-solvated palladium-hydride complex using quantum mechanics (B3LYP/LACVP** with the PBF polarizable continuum solvent model) for PdII-((-)sparteine)(H)(Cl) in the presence of base, specifically focusing on the pathways proceeding through Pd-0. The lowest barrier Pd-0 pathway proceeds through a rate-determining base-assisted deprotonation of the palladium, followed by the association of molecular oxygen and the subsequent loss of chloride, forming the corresponding eta(2)-peroxo-palladium complex. We also examine the spin transition and the completion of the reaction to form PdCl2 and H2O2. Together with our previously published Pd-H/O-2 direct insertion mechanism, these reports provide a complete mapping of the possible pathways for reoxidation of palladium hydride with molecular oxygen. For this particular system, we conclude that direct insertion is preferred (Delta Delta H-double dagger = 6.2 kcal/mol, Delta Delta G(double dagger) = 7.5 kcal/mol) and trace this preference to the bidentate character of sparteine and the lack of pi-accepting ligands. Suggestions are included for how this preference can be switched.