In this paper, we show, using DFT methods, reactivity indices, and electron density topology, that oxidative degradation of azo dyes occurs through the cleavage of the N-N bond following hydroxyl radical addition to the chromophore. Structures for both experimentally proposed reaction pathways, involving either cleavage of the C-N or N-N bonds, have been optimized at the B3LYP/6-31G(d) level of theory; the energies were further refined using single point calculations at the B3LYP/6-311+G(d,p)/B3LYP/6-31G(d) level. Potential energy surfaces (PES) have been compared for the two mechanisms to determine which mechanism is energetically more favorable. Reactivity indices and electron density topology calculations confirmed the findings of the PES. Detailed electron density contour mapping allowed accurate visualization of the electron distribution, i.e., its topology, for the transition states. The effect of the medium dielectric constant was allowed for via self-consistent reaction field (SCRF) theory calculations using the IEFPCM method with water as solvent. A "super-molecule" approach involving complex formation between one solvent molecule and the molecules along the reaction pathway, was used to elucidate the mechanism of proton transfer.