Phosphite dehydrogenase (PTDH) catalyzes an unusual phosphoryl transfer reaction in which water displaces a hydride leaving group. Despite extensive effort, it remains unclear whether PTDH catalysis proceeds via an associative or dissociative mechanism. Here, primary H-2 and secondary O-18 kinetic isotope effects (KIEs) were determined and used together with computation to characterize the transition state (TS) catalyzed by a thermostable PTDH (17X-PTDH). The large, normal O-18 KIEs suggest an associative mechanism. Various transition state structures were computed within a model of the enzyme active site and H-2 and O-18 KIEs were predicted to evaluate the accuracy of each TS. This analysis suggests that 17X-PTDH catalyzes an associative process with little leaving group displacement and extensive nucleophilic participation. This tight TS is likely a consequence of the extremely poor leaving group requiring significant P-O bond formation to expel the hydride. This finding contrasts with the dissociative TSs in most phosphoryl transfer reactions from phosphate mono- and diesters.