The nucleophilic substitution of N-2 in benzenediazonium ion 1 by one H2O molecule to form protonated phenol 2 has been studied with ab initio (RHF, MP2, QCISD(T)//MP2) and hybrid density functional (B3LYP) methods. Three mechanisms were considered: (a) the unimolecular process S(N)1Ar with steps 1 --> Ph+ + N-2 and Ph+ + H2O --> 2, (b) the bimolecular process SN2Ar with precoordination 1 + H2O --> 1(.)H(2)O, S-N reaction 1(.)H(2)O --> [TS](double dagger) --> 2(.)N(2) and dissociation of the postcoordination complex 2(.)N(2) --> 2 + N-2, and (c) the direct bimolecular process S(N)2Ar that bypasses precoordination and involves just the SN reaction 1 + H2O --> [TS](double dagger) --> 2(.)N(2). The SN2Ar reactions proceed by way of a C-s symmetric S(N)2Ar transition state structure that is rather loose, contains essentially a phenyl cation weakly bound to N-2 and OH2, and is analogous to the transition state structures of front-side nucleophilic replacement at saturated centers. In solvolysis reactions, all of these processes follow first-order kinetics, and the electronic relaxation is essentially the same. It is argued that "unimolecular dediazoniations" have to proceed by way of S(N)2Ar transition state structures because strict S(N)1Ar reactions cannot be realized in solvolyses, despite the fact that the Gibbs free energy profile favors the strict S(N)1Ar process over the SN2Ar reaction by 6.7 kcal/mol. It is further argued that the direct S(N)2Ar process is the best model for the solvolysis reaction for dynamic reasons, and its Gibbs free energy of activation is 19.3 kcal/mol and remains higher than the S(N)1Ar value. Even though the S(N)1Ar and S(N)2Ar models provide activation enthalpies and SKIE values that closely match the experimental data, the analysis leads us to the unavoidable conclusion that this agreement is fortuitous. While the experiments do show that the solvent effect on the activation energy is about the same for all solvents, they do not show the absence of a solvent effect. The ab initio results presented here suggest that the solvent effect on the direct S(N)2Ar dediazoniation is approximately 12 kcal/mol, and computation of solvent effects with the isodensity polarized continuum model (IPCM) support this conclusion.