Directed C-H functionalization of heterocycles through an exocyclic directing group (DG) is challenging due to the interference of the endocyclic heteroatom(s). Recently, the "heteroatom problem" was circumvented with the development of the protection-free Pd-catalyzed aerobic C-H functionalization of heterocycles guided by an exocyclic CONHOMe DG. We herein provide DFT mechanistic insights to facilitate the expansion of the strategy. The transformation proceeds as follows. First, the Pd2(dba)3 precursor interacts with t-BuNC (L, one of the substrates) and O2 to form the L2Pd(II)-η(2)-O2 peroxopalladium(II) species that can selectively oxidize N-methoxy amide (e.g., PyCONHOMe) substrate, giving an active L2Pd(II)X2 (X = PyCONOMe) species and releasing H2O2. After t-BuNC ligand migratory insertion followed by a 1,3-acyl migration and association with another t-BuNC, L2Pd(II)X2 converts to a more stable C-amidinyl L2Pd(II)XX' (X' = PyCON(t-Bu)C═NOMe) species. Finally, L2Pd(II)XX' undergoes C-H activation and C-C reductive elimination, affording the product. The C-H activation is the rate-determining step. The success of the strategy has three origins: (i) the N-methoxy amide DG can be easily oxidized in situ to generate the active L2Pd(II)X2 species via the oxidase pathway, thus preventing the destructive oxygenase pathway leading to stable t-BuNCO or the O-bridged dimeric Pd(II) species. The methoxy group in this amide DG greatly facilitates the oxidase pathway, and the tautomerization of N-methoxy amide to its imidic acid tautomer makes the oxidation of the substrate even easier. (ii) The X group in L2Pd(II)X2 can serve as an internal base to promote the C-H activation via CMD (concerted metalation-deprotonation) mechanism. (iii) The strong coordination ability of t-BuNC substrate/ligand suppresses the conventional cyclopalladation pathway enabled by the coordination of an endocyclic heteroatom to the Pd-center.