Understanding the molecular details of antibiotic resistance by the bacterial enzymes beta-lactamases is vital for the development of novel antibiotics and inhibitors. In this spirit, the detailed mechanism of deacylation of the acyl enzyme complex formed by cephalothin and class C beta-lactamase is investigated here using hybrid quantummechanical/molecular-mechanical molecular dynamics methods. The roles of various active-site residues and substrate in the deacylation reaction are elucidated. We identify the base that activates the hydrolyzing water molecule and the residue that protonates the catalytic serine (Ser64). Conformational changes in the active sites and proton transfers that potentiate the efficiency of the deacylation reaction are presented. We have also characterized the oxyanion holes and other H-bonding interactions that stabilize the reaction intermediates. Together with the kinetic and mechanistic details of the acylation reaction, we analyze the complete mechanism and the overall kinetics of the drug hydrolysis. Finally, the apparent rate-determining step in the drug hydrolysis is scrutinized.