Density functional theory, polarizable continuum models and semiempirical hybrid quantum mechanical/molecular mechanical (QM/MM) calculations were applied to the hydrolysis of phosphate diesters in the gas phase, in solution, and in the enzyme RNase A. Neutralization of the negative charge of the pentacovalent phosphorane intermediates provides a substantial stabilization of the transition-state structures in the gas phase. Inclusion of solvent effects on the phosphate/phosphorane species was critical to reproducing the trends in reactivity observed experimentally. Finally, the catalytic mechanism for the hydrolysis of uridine 2',3'-cyclic phosphate by RNase A was studied by QM/MM calculations. Our results suggest that the rate-limiting transition state of the reaction corresponds to the approach of a water molecule to the phosphate and its activation by His119. Thus, His119 acts as a generalized base for the reaction. The water attack leads to a pentacovalent phosphorane transition state of formal charge -2; this excess of negative charge in the transition state is stabilized by a number of positively charged residues including His12 and Lys41. In the second stage of the reaction, the phosphorane is converted into products. This part of the reaction proceeds without a detectable barrier, and it is facilitated by a proton transfer from Lys41 to the departing O2'.