Ab initio molecular orbital theory has been used to study the reactions catalyzed by the Bit-dependent enzyme diol dehydratase. The calculations show that a pathway involving the 1,2-shift of a hydroxyl group is greatly facilitated by partial proton transfer to the migrating oxygen. These results suggest a conceptually simple mechanism for the rearrangement whose reaction rate is consistent with experiment. The inclusion of a gem-diol intermediate in the proposed pathway is in accordance with O-18-labeling experiments and thus overcomes important shortcomings iii previously proposed mechanisms.