The regiospecific hydroxylation of the naphthyl ring at the C(2) position of unsymmetrical 1-(phenylazo)naphthalene 1 was achieved via oxygen atom insertion into the palladium-naphthyl bond of 2 with iodosylbenzene, followed by demetallation. The insertion of oxygen atom into the PdC(phenyl) bond of the cyclopalladated azobenzenes 5 was also achieved with iodosylbenzene.