Ab initio molecular orbital calculations at the G2(MP2,SVP) level are reported for the reaction between methylamine and formaldehyde to form the Schiff-base, N-methylmethanimine, with loss of water. The gasphase barrier to carbinolamine formation through intramolecular proton transfer is found to be dramatically reduced when explicit water molecules are employed to facilitate the proton transfer. The lowest barrier lies 14.7 kJ mol(-1) above the complex between methylamine, formaldehyde, and two water molecules and passes through a zwitterionic intermediate. The structural features of the transition state for this process closely resemble those predicted experimentally. Although intramolecular proton transfer through water molecules to form the imine from the carbinolamine requires significantly less energy than without the water, the barrier remains quite large. With two waters the barrier is calculated to be 111.9 kJ mol(-1). A considerably smaller barrier is predicted for the protonated carbinolamine, 67.9 kJ mol(-1), and while there is no experimental evidence for internal proton transfer, the calculated structure shows characteristics of the experimentally predicted transition state. Calculated aqueous-phase dissociation energies are too small in comparison with the experimentally observed equilibrium constants.