A combined Monte Carlo quantum mechanical and molecular mechanical (QM/MM) simulation method is described for the investigation of the solvent effects on chemical reactions, In the present approach, ab initio molecular orbital calculations are first used to locate the transition state, from which the reaction path is determined by using Gaussian 90. Then, free energy changes between adjacent structures generated along this intrinsic reaction path are evaluated via statistical perturbation theory using the combined QM/MM-AM1/TIP3P potential. Since empirical parametrization of the reaction system is not needed in these calculations, the method presented here is essentially an automated procedure for simulating reactions in solution, which may be conveniently used by organic chemists. We have employed the procedure to examine the decarboxylation of 3-carboxybenzisoxazole in aqueous solution. The predicted free energy of activation is 26.1 +/- 0.3 kcal/mol, in excellent agreement with the experimental value of 26.3 kcal/mol. Analyses of the contributing factors in solute-solvent interaction suggest that the aqueous solvent effect is primarily due to the difference in the intrinsic (in vacuo) charge distributions between the reactant and transition state. Solvent polarization contributes significantly to the solute-solvent interaction; however, the nature of the electronic polarization of the reactant and the transition state is markedly different.