The isomerization reaction cyanamide --> carbodiimide in vacuo and in the presence of up to six water molecules has been investigated by means of DFT and MP2 calculations, using a flexible basis set. The reliability of such methods has been checked against results of coupled cluster calculations on isolated molecules. The effect of water molecules has also been investigated in the case of the hydrolysis reaction of cyanamide and carbodiimide, leading to isourea. The number of water molecules considered is large enough to give results converged in activation and hydration energies. In addition to the water molecules explicitly described, the effect of water bulk solvent is taken into account according to the polarizable continuum model. The results show that the direct hydrolysis of H2NCN is hindered by an activation energy much higher than that for HNCNH, which in turn can be obtained from cyanamide with a relatively easy process.