The catalytic mechanism of limonene epoxide hydrolase (LEH) was investigated theoretically using the density functional theory method B3LYP. LEH is part of a novel limonene degradation pathway found in Rhodococcus erythropolis DCL14, where it catalyzes the hydrolysis of limonene-1,2-epoxide to give limonene-1,2-diol. The recent crystal structure of LEH was used to build a model of the LEH active site composed of five amino acids and a crystallographically observed water molecule. With this model, hydrolysis of different substrates was investigated. It is concluded that LEH employs a concerted general acid/general base-catalyzed reaction mechanism involving protonation of the substrate by Asp101, nucleophilic attack by water on the epoxide, and abstraction of a proton from water by Asp132. Furthermore, we provide an explanation for the experimentally observed regioselective hydrolysis of the four stereoisomers of limonene-1,2-epoxide.