Site-selective functionalizations of C-H bonds are often achieved with a directing group that leads to five- or six-membered metallacyclic intermediates. Analogous reactions that occur through four-membered metallacycles are rare. We report a challenging palladium-catalyzed oxidation of primary C-H bonds beta to nitrogen in an imine of an aliphatic amine, a process that occurs through a four-membered palladacycic intermediate. The success of the reaction relies on the identification, by H/D exchange, of a simple directing group (salicylaldehyde) capable of inducing the formation of this small ring. To gain insight into the steps of the catalytic cycle of this unusual oxidation reaction, a series of mechanistic experiments and density functional theory (DFT) calculations were conducted. The experimental studies showed that cleavage of the C-H bond is rate-limiting and formation of the strained four-membered palladacycle is thermodynamically uphill. DFT calculations corroborated these conclusions and suggested that the presence of an intramolecular hydrogen bond between the oxygen of the directing group and hydroxyl group of the ligating acetic acid is crucial for stabilization of the palladacyclic intermediate.