We use quantum mechanics to elucidate the mechanism for the reaction of molecular oxygen with palladium-hydride complexes, (pyridine)(2)-Pd-II(H)OAc, in toluene, focusing specifically on the direct insertion pathway of dioxygen into the Pd-H bond and pathways proceeding through a Pd-0 intermediate for both cis and trans starting configurations as well as with the assistance of an extra HOAc molecule We report the potential energy surfaces and structures for each of these pathways. This is the first examination of these two mechanisms for both cis and trans isomers of a system employing two monodentate ligands. It is the first case of acid-assisted reductive elimination from a square planar Pd-H. The calculated mechanisms indicate that cis/trans isomerization is feasible and demonstrates that the Pd-0 pathway is favored for both cis (Delta Delta H-double dagger = 2.2 kcal/mol, Delta Delta G(double dagger) = 9.3 kcal/mol) and trans cases (HOAc-assisted; Delta Delta H-double dagger = -2.6 kcal/mol, Delta Delta G(double dagger) = 5.8 kcal/mol) demonstrating that the presence of two monodentate ligands changes the mechanism from that of the bidentate case.