Palladium-catalyzed C-H functionalization of acyldiazomethanes with aryl iodides has been developed. This reaction is featured by the retention of the diazo functionality in the transformation, thus constituting a novel method for the introduction of diazo functionality to organic molecules. Consistent with the experimental results, the density functional theory (DFT) calculation indicates that the formation of Pd-carbene species in the catalytic cycle through dinitrogen extrusion from the palladium ethyl diazoacetate (Pd-EDA) complex is less favorable. The reaction instead proceeds through Ag2CO3 assisted deprotonation and subsequently reductive elimination to afford the products with diazo functionality remained. This C-H functionalization transformation can be further combined with the recently evolved palladium-catalyzed cross-coupling reaction of diazo compounds with aryl iodides to develop a tandem coupling process for the synthesis of α,α-diaryl esters. DFT calculation supports the involvement of Pd-carbene as reactive intermediate in the catalytic cycle, which goes through facile carbene migratory insertion with a low energy barrier (3.8 kcal/mol). (Chemical Equation Presented).