Chemical transformation inside artificial hosts like cages has been a booming field of research. However, the use of such artificial cages in carrying out selective transformation of one molecule from a mixture of different molecules has been underexplored. Herein, we report the oxidation of the benzylic C(sp3)-H of alkylarenes inside an aqueous Pd6L4 cage 1 without using any traditional oxidant. 1 was an efficient host in inducing complete oxidation of the alkyl arenes such as xanthene, thioxanthene, fluorene, and acridine derivatives inside its cavity, which other reported Pd6 cages did not show under similar conditions. It was also observed that encapsulation within the cage was a necessary criterion for oxidation to occur in water. Using this criterion and the higher binding affinity of cage 1 to fluorene over other fluorene derivatives such as 2-bromofluorene and 2,7-dibromofluorene, 1 was able to selectively oxidize fluorene from a mixture of fluorene derivatives through selective encapsulation. This work provides insight into an alternate approach for the selective oxidation of active methylene-containing organic compounds using differences in host-guest affinity in an aqueous environment.