Density functional theory investigations have elucidated the mechanism and origins of meta-regioselectivity of Pd(II)-catalyzed C-H olefinations of toluene derivatives that employ a nitrile-containing template. The reaction proceeds through four major steps: C-H activation, alkene insertion, beta-hydride elimination, and reductive elimination. The C-H activation step, which proceeds via a concerted metalation-deprotonation (CMD) pathway, is found to be the rate- and regioselectivity-determining step. For the crucial C-H activation, four possible active catalytic species monomeric Pd(OAc)(2), dimeric Pd-2(OAc)(4), heterodimeric PdAg-(OAc)(3), and trimeric Pd-3(OAc)(6)-have been investigated. The computations indicated that the C-H activation with the nitrile-containing template occurs via a Pd Ag heterodimeric transition state. The nitrile directing group coordinates with Ag while the,Pd is placed adjacent to the meta-C-H bond in the transition state, leading to the observed high meta-selectivity. The Pd-2(OAc)(4) dimeric mechanism also leads to the meta-C-H activation product but with higher activation energies than the Pd Ag heterodimeric mechanism. The Pd monomeric and trimeric mechanisms require much higher activation free energies and are predicted to give ortho products. Structural and distortion energy analysis of the transition states revealed significant effects of distortions of the template on mechanism and regioselectivity, which provided hints for further developments of new templates.