Density Functional Theory (DFT) has been applied to a comprehensive mechanistic study of the conversion reaction of the Pd(II)-hydride complex, (IMe)2(RCO2)PdH (R=CH3, Ph, and p-O2NC6H4), to the corresponding Pd(II)-hydroperoxide in the presence of molecular oxygen. The calculations have evaluated the two mechanistic proposed alternatives, that are both considered viable on the basis of current data, of slow RCO2H reductive elimination followed by oxygenation (Path A) and direct O2 insertion (Path B). Results suggest that the mechanism of direct insertion of molecular oxygen into the Pd-H bond of the initial complex is energetically preferred. The activation energy relative to the rate-determining step of Path A, indeed, is calculated to be lower than the activation energy of the rate determining step of the alternative Path B, whatever ligand (CH3CO2, Ph, CO2, p-O2NC6H4CO2) is coordinated to the Pd center. The calculated free activation energy of the rate-determining hydrogen abstraction step (ΔG* = 24.8 kcal/mol) in the case of the oxygenation reaction of the benzoate-ligated Pd(II)-hydride complex is in very good agreement with the experimentally determined value of 24.4 kcal/mol. In addition, according to the experimentally detected enhancement of the reaction rate due to the presence of a nitro group on the benzoate ligand, our calculations show that the transition state for the hydrogen atom abstraction by molecular oxygen along the pathway for the oxygenation reaction of (IMe)2(p-O2NC6H4CO2)PdH lies lower in energy with respect to the analogous transition state calculated for R=Ph.