Acetylene hydratase is a tungsten-dependent enzyme that catalyzes the nonredox hydration of acetylene to acetaldehyde. Density functional theory calculations are used to elucidate the reaction mechanism of this enzyme with a large model of the active site devised on the basis of the native X-ray crystal structure. Based on the calculations, we propose a new mechanism in which the acetylene substrate first displaces the W-coordinated water molecule, and then undergoes a nucleophilic attack by the water molecule assisted by an ionized Asp13 residue at the active site. This is followed by proton transfer from Asp13 to the newly formed vinyl anion intermediate. In the subsequent isomerization, Asp13 shuttles a proton from the hydroxyl group of the vinyl alcohol to the α-carbon. Asp13 is thus a key player in the mechanism, but also W is directly involved in the reaction by binding and activating acetylene and providing electrostatic stabilization to the transition states and intermediates. Several other mechanisms are also considered but the energetic barriers are found to be very high, ruling out these possibilities.