The reaction mechanism of cytosine deaminase from Escherichia coli is studied using density functional theory. This zinc-dependent enzyme catalyzes the deamination of cytosine to form uracil and ammonia. The calculations give a detailed description of the catalytic mechanism and establish the role of important active-site residues. It is shown that Glu217 is essential for the initial deprotonation of the metal-bound water nucleophile and the subsequent protonation of the substrate. It is also demonstrated that His246 is unlikely to function as a proton shuttle in the nucleophile activation step, as previously proposed. The steps that follow are nucleophilic attack by the metal-bound hydroxide, protonation of the leaving group assisted by Asp313, and C-N bond cleavage. The calculated overall barrier is in good agreement with the experimental findings. Finally, the calculations reproduce the experimentally determined inverse solvent deuterium isotope effect, which further corroborates the suggested reaction mechanism.