Ab initio calculations have been applied to the mechanism of diborane hydrolysis in the gas phase. In the first step, water adds to diborane to form a complex which eliminates H-2 in a concerted step to form BH3, H-2, and H2BOH. The subsequent steps to the formation of the ultimate product, B(OH)(3), can take place via two alternative pathways. In the first pathway, H2BOH can form a complex with H2O which eliminates H-2 to form HB(OH)2, followed by addition of another molecule of H2O and elimination of another H-2. Alternatively, two molecules of H2BOH can associate to form a dimer which dissociates to form BH3 plus HB(OH)(2). Likewise, the association/dissociation of H2BOH/HB(OH)(2) to BH3/B(OH)(3) completes the transformation. Thus, in the second pathway, H2BOH comes exclusively from the first step while the hydrolysis product is due to equilibrium steps driven by the greater thermodynamic stability of products.