The hydrolysis of pyrophosphate to form two orthophosphates is coupled to virtually all biosynthetic reactions. Despite numerous experiments, a detailed understanding of the energetic factors contributing to this reaction energy is still lacking. In this paper we describe large basis set ab initio calculations of the reaction energy for pyrophosphate hydrolysis. These calculations were performed using second-order Moller-Plesset perturbation theory at the Hartree-Fock/6-311++G** optimized geometries. We find that in the gas phase the hydrolysis of the fully-protonated pyrophosphate is unfavored by 5 kcal/mol. The origin of this unfavorable free energy is a pair of intramolecular hydrogen bonds that link the two phosphate moieties. For the anionic forms of pyrophosphate that exist near neutral pH, the gas-phase hydrolysis energies are strongly negative due to electrostatic repulsion. We have also predicted the aqueous phase hydration energy using several methods based on a dielectric continuum model of the aqueous solvent. Aqueous solvation acts to cancel this repulsion; the ab initio aqueous phase result, which we expect to be most reliable; predicts hydrolysis energies of 3 to 7 kcal/mol for the protonation states predominant near physiological pH.