Ab initio molecular orbital (MO) and density functional studies have been carried out on the keto-enol tautomerization process in thiazolidinediones to understand the mechanism of rapid racemization observed in these systems. MP2(full)/6-31+G* results on model thiazolidinedione 1 indicate that the energy difference between keto and enol tautomers is 24.04 kcal/mol, which is larger than that in acetaldehyde (16.23 kcal/ mol). Neither the ring strain in 1 nor the electron delocalization in its tautomers is significant enough to facilitate rapid racemization through this mechanism. Reversible S-oxide formation increases the acidity of the hydrogen at the chiral center as well as provides an alternative path for tautomerization, suggesting that such a mechanism is responsible for the rapid racemization observed under physiological conditions.