The performance of the density functional theory (DFT)-based effective fragment potential (EFP) method is assessed using the S(N)2 reaction: Cl- + nH(2)O + CH3Br = CH3Cl + Br- + nH(2)O. The effect of the systematic addition of water molecules on the structures and relative energies of all species involved in the reaction has been studied. The EFP1 method is compared with second-order perturbation theory (MP2) and DFT results for n = 1, 2, and 3, and EFP1 results are also presented for four water molecules. The incremental hydration effects on the barrier height are the same for all methods. However, only full MP2 or MP2 with EFP1 solvent molecules are able to provide an accurate treatment of the transition state (TS) and hence the central barriers. Full DFT and DFT with EFP1 solvent molecules both predict central barriers that are too small. The results illustrate that the EFP1-based DFT method gives reliable results when combined with an accurate quantum mechanical (QM) method, so it may be used as an efficient alternative to fully QM methods in the treatment of larger microsolvated systems.