The mechanism for the palladium–catalyzed allylic C–H activation was investigated using a combination of experimental and theoretical methods. A Hammett study revealed a buildup of a partial negative charge in the rate-determining step, while determination of the kinetic isotope effect (KIE) indicated that the C–H bond is broken in the turnover-limiting transition state. The-se experimental findings were further substantiated by carrying out a detailed density functional theory (DFT) based investigation of the entire catalytic cycle. The DFT modeling supports a mechanism where a coordinated acetate acts as a base in an intramolecular fashion during the C–H activation step. The re-oxidation of palladium was found to reach a similar energy level as that of the C–H activation. Calculations of turnover frequencies (TOF) for the entire catalytic cycle for the C–H alkylation were used to acquire a better understanding of the experimental KIE value. The good correspondence between the experimental KIE and the computed KIE values allows a discrimination between the acetate acting in an intramolecular fashion (C–H alkylation) and an intermolecular fashion (C–H acetoxylation and C–H amination).