We report a mechanism of adenosine triphosphate (ATP) to cyclic adenosine monophosphate (cAMP) conversion by the mammalian type V adenylyl cyclase revealed in molecular dynamics (MD) and quantum mechanics/molecular mechanics (QM/MM) simulations. We characterize a set of computationally derived enzyme-substrate (ES) structures showing an important role of coordination shells of magnesium ions in the solvent accessible active site. In the lowest energy ES conformation, the coordination shell of MgA(2+) does not include the O-delta 1 atom of the conserved Asp440 residue. Starting from this conformation, a one-step reaction mechanism is characterized that includes proton transfer from the ribose O-3'H-3' group in ATP to Asp440 via a shuttling water molecule concerted with P-A-O-3A bond cleavage and O-3'-P-A bond formation. The energy profile of this route is consistent with the observed reaction kinetics. The computed energy profiles initiated from higher energy ES complexes are characterized by larger energy expenses to complete the reaction. Consistent with experimental data, we show that the Asp440Ala mutant of the enzyme should exhibit a reduced but retained activity. All considered reaction pathways include proton wires from the O-3'H-3' group via shuttling water molecules.