Interplay of Fermi surface topology and electron correlation is the quintessential ingredient underlying spontaneous symmetry breaking in itinerant electronic systems. In one-dimensional (1D) systems at half-filling, the inherent Fermi surface nesting makes the translationally invariant metallic state unstable, which is known as Peierls instability. Extending the scope of Peierls instability to two (2D) or three dimensions (3D), however, is not straightforward, since the Fermi surface in higher dimensions is generally not nested. In this work, we show that a perfectly nested Fermi surface can be realized in a class of 2D perovskite oxides, giving rise to 2D Peierls instability. Here the central role is played by the zone boundary Dirac line node (DLN) protected by two orthogonal glide mirrors induced by the rotation of oxygen octahedra. Especially, at a critical angle of the octahedron rotation, the zone-boundary DLN flattens, leading to logarithmically diverging susceptibility. We propose the 2D Peierls instability driven by dispersionless DLN as a principle mechanism for spontaneous symmetry breaking in various layered perovskite oxides including the antiferromagnetism of Sr$_2$IrO$_4$. As a clear signature of the 2D Peierls instability, we predict that the magnetic domain wall in Sr$_2$IrO$_4$ hosts localized soliton modes.