Oxidation of the Pd-II complex (N4)(PdMe2)-Me-II (N4 = N,N'-di-tert-butyl-2,11-diaza[3.3](2,6)pyridinophane) with O-2 or ROOH (R = H, tert-butyl, cumyl) produces the Pd-III species [(N4)(PdMe2)-Me-III](+), followed by selective formation of ethane and the monomethyl complex (N4)(PdMe)-Me-II(OH). Cyclic voltammetry studies and use of 5,5-dimethyl-1-pyrroline-N-oxide (DMPO) as a spin trap suggest an inner-sphere mechanism for (N4)(PdMe2)-Me-II oxidation by O-2 to generate a Pd-III-superoxide intermediate. In addition, reaction of (N4)-(PcMe2)-Me-II with cumene hydroperoxide involves a heterolytic O-O bond cleavage, implying a two-electron oxidation of the Pd-II precursor and formation of a transient Pd-IV intermediate. Mechanistic studies of the C-C bond formation steps and crossover experiments are consistent with a nonradical mechanism that involves methyl group transfer and transient formation of a Pd-IV species. Moreover, the (N4)(PdMe)-Me-II(OH) complex formed upon ethane elimination reacts with weakly acidic C-H bonds of acetone and terminal allcynes, leading to formation of a new Pd-II-C bond. Overall, this study represents the first example of C-C bond formation upon aerobic oxidation of a Pd-II dimethyl complex, with implications in the development of Pd catalysts for aerobic oxidative coupling of C-H bonds.