The mechanism of Pd(II)-catalyzed meta-C-H bond olefination of arenes with a carboxyl directing group (DG)-containing template has been investigated with density functional theory. The reaction includes three major steps: C-H bond activation, alkene insertion, and β-hydride elimination. The C-H activation step, which proceeds via a concerted metalation-deprotonation pathway, is found to be the rate- and regioselectivity-determining step. We proposed a mono-N-protected amino acid (MPAA)/DG-assisted C-H activation model, in which the carboxyl DG coordinates with the Pd center and delivers it to the meta-position of arene, and the bidentate dianionic MPAA acts as a base for deprotonation. There is a hydrogen bonding interaction between the carboxyl DG and the carboxylate group of MPAA. An alternative Pd(OAc)2-catalyzed mechanism without involvement of MPAA is also operative. The template is conformationally flexible, and multiple low-energy transition-state conformations contribute to the regioselectivity.