(DAF)Pd(OAc)2 (DAF = 4,5-diazafluorenone) catalyzes aerobic intramolecular aryl C–H amination with N-benzenesulfonyl-2-aminobiphenyl in dioxane to afford the corresponding carbazole product. Mechanistic studies show that the reaction involves in situ generation of peroxide species from 1,4-dioxane and O2, and the reaction further benefits from the presence of glycolic acid, an oxidative decomposition product of dioxane. An induction period observed for the formation of the carbazole product correlates with the formation of 1,4-dioxan-2-hydroperoxide via autoxidation of 1,4-dioxane, and the in situ-generated peroxide is proposed to serve as the reactive oxidant in the reaction. These findings have important implications for the palladium-catalyzed aerobic oxidation reactions conducted in ethereal solvents.