Density functional theory calculations at IDSCRF-B3LYP/DZVP computational level were conducted on palladium-catalyzed regioselective B–H activation and diarylation of o-carboranes with aryl iodides in solution. Computational results indicate that this reaction follows a multistep mechanism and needs to get over several transition states before the final B(4,5)-diarylated o-carborane derivatives are formed. B–H activation, oxidation addition, and successive reduction of the Pd(II) catalyst involving a Pd(II)–Pd(IV)–Pd(II) catalytic cycle has been confirmed, in which AgOAc plays a crucial role. Electron-donating group on the cage carbon of o-carboranes is verified to be beneficial for its B–H activation and diarylation, while steric hindrance between the aryl and o-carboranyl groups retards it. Natural population analysis and Gibbs free energetic results predict consistent regioselectivities with experiments and manifest the pivotal role of electronic effect in controlling regioselective B–H activation of o-carboranes. These results are expected to shed some light on further improvement of experimental conditions and better controlling of regioselectivities.