The reaction mechanism of arylmalonate decarboxylase is investigated using density functional theory calculations. This enzyme catalyzes the asymmetric decarboxylation of prochiral disubstituted malonic acids to yield the corresponding enantiopure carboxylic acids. The quantum chemical cluster approach is employed, and two different models of the active site are designed: a small one to study the mechanism and characterize the stationary points and a large one to study the enantioselectivity. The reactions of both a-methyl-a-phenylmalonate and a-methyl-a-vinylmalonate are considered, and different substrate binding modes are assessed. The calculations overall give strong support to the suggested mechanism in which decarboxylation of the substrate first takes place, followed by a stereoselective protonation by a cysteine residue. The enediolate intermediate and the transition states are stabilized by a number of hydrogen bonds that make up the dioxyanion hole, resulting in feasible energy barriers. It is further demonstrated that the enantioselectivity in the case of a-methyl-a-phenylmalonate substrate is dictated already in the substrate binding, because only one binding mode is energetically accessible, whereas in the case of the smaller a-methyl-a-vinylmalonate substrate, both the binding and the following transition states contribute to the enantioselectivity.