Density functional theory (DFT) calculations were performed to study Pd-catalyzed ipso,meta-dimethylation reaction of ortho-substituted iodoarenes. In the presence of K2CO3, aryl−I oxidative addition on Pd(0) catalysts can generate arylpalladium(II) intermediate, which undergoes two sequent processes of C−H activation, CH3−I oxidative addition (Ar−C reductive elimination/CH3−I oxidative addition/Ar−C oxidative addition), and Ar−C reductive elimination to generate dimethylated intermediate. Then hydrogen transfer, C−hydride reductive elimination, and ligand exchange can take place to generate 2,6-dimethylanisole 3b. With KOAc as the base, 2,3-dihydrobenzofuran 4b can be obtained via aryl−I oxidative addition, two sequent processes of C−H activation/Ar−C reductive elimination/CH3−I oxidative addition/Ar−C oxidative addition/Ar−C reductive elimination, the third C−H activation, reductive elimination, and ligand exchange, respectively. The competition between the third C−H activation and the hydrogen transfer from dimethylated intermediate determines the selectivity of the reaction. The hydrogen transfer is generally superior to the third C−H activation due to the stronger reactivity of methyl group in methanol than normal methyl group. When K2CO3 is used, such electronic effect is dominant. However, when KOAc is employed, different structure and properties with K2CO3 cause the ligand exchange step highly endergonic, thereby rendering subsequent hydrogen transfer not favorable and leading to 2,3-dihydrobenzofuran 4b to be the final product.