Adenosine 5'-triphosphate (ATP) is a basic energy carrier in cellular metabolism. As a high-energy intermediate, it provides a way to convert energy from one biochemical process to another via an environment-dependent hydrolysis reaction. Two paths for ATP hydrolysis in water with Mg2+ are studied here using the density functional method: an associative reaction involving a nucleophilic attack of one water molecule, and a dissociative reaction involving a scission of the terminal bridging P-O bond. The latter has an activation energy of 35 kcal/mol, where 25 kcal/mol can be assigned to the P-O bond breaking and 10 kcal/mol to the artificial stability of PO3- resulting from the small size and the short time scale of the simulation. The path and energy barrier (39 kcal/mol) of the less-favorable associative reaction suggest that it is possible only under conditions where the lytic water is already deprotonated to OH-. The Mg cation elongates the terminal bridging P-O bond when forming a bidentate chelate with the two terminal phosphates. Additional constrained displacements of Mg2+ with respect to the nearest phosphate oxygens show that a direct electrophilic attack of Mg toward a bridging O is possible.