Although cross coupling reaction with nitroarene as the electrophilic partner has gained high interest recently, the palladium catalyzed aryl–nitro bond activation reaction still requires rather high temperature and harsh condition. In this work, based on Nakao’s nitrogen heterocyclic carbene (NHC) ligand, we systematically explored the substituent effect on the oxidative addition step, the known rate-determining step of the whole reaction, by density functional theory (DFT) calculation. The key aryl ring on the ligand skeleton, namely ring A, acts as a π-donor and stabilizes the palladium center of the transition state, as shown by Extended Transition State Natural Orbital of Chemical Valance (ETS-NOCV) analysis, and thus an electron-rich ring A is expected to lower the barrier. However, the polarization and electrostatic effects were shown to be as or even more important, although they were often ignored before. These effects originate from through-space interaction with the nitro group in the resting state, and the overall effect is that any polarizable or partly negative group nearby the ortho- or meta¬- site of ring A is harmful for the reaction. Based on these discoveries, we proposed a list of guidelines for successful ligand development and designed several new ligands. These ligands exhibit significantly lower barrier than the reported Nakao’s ligand by as large as ~5 kcal/mol, in both gas phase and solvation, and might be good candidates for further experimental study.