For the first time a consistent catalytic mechanism of phospholipase C from Bacillus cereus is reported based on molecular mechanics calculations. We have identified the position of the nucleophilic water molecule, which is directly involved in the hydrolysis of the natural substrate phosphatidylcholine, in phospholipase C. This catalytically essential water molecule, after being activated by an acidic residue (Asp55), performs the nucleophilic attack on the phosphorus atom in the substrate, leading to a trigonal bipyramidal pentacoordinated intermediate (and structurally similar transition state). The subsequent collapse of the intermediate, regeneration of the enzyme, and release of the products has to involve a not yet identified second water molecule. The catalytic mechanism reported here is based on a series of molecular mechanics calculations. First, the x-ray structure of phospholipase C from B cereus including a docked substrate molecule was subjected to a stepwise molecular mechanics energy minimization. Second, the location of the nucleophilic water molecule in the active site of the fully relaxed enzyme-substrate complex was determined by evaluation of nonbonded interaction energies between the complex and a water molecule. The nucleophilic water molecule is positioned at a distance (3.8 A) from the phosphorus atom in the substrate, which is in good agreement with experimentally observed distances. Finally, the stability of the complex between phospholipase C, the substrate, and the nucleophilic water molecule was verified during a 100 ps molecular dynamics simulation. During the simulation the substrate undergoes a conformational change, but retains its localization in the active site. The contacts between the enzyme, the substrate, and the nucleophilic water molecule display some fluctuations, but remain within reasonable limits, thereby confirming the stability of the enzyme-substrate-water complex. The protocol developed for energy minimization of phospholipase C containing three zinc ions located closely together at the bottom of the active site cleft is reported in detail. In order to handle the strong electrostatic interactions in the active site realistically during energy minimization, delocalization of the charges from the three zinc ions was considered. Therefore, quantum mechanics calculations on the zinc ions and the zinc-coordinating residues were carried out prior to the molecular mechanics calculations, and two different sets of partial atomic charges (MNDO-Mulliken and AMI-ESP) were applied. After careful assignment of partial atomic charges, a complete energy minimization of the protein was carried out by a stepwise procedure without explicit solvent molecules. Energy minimization with either set of charges yielded structures, which were very similar both to the x-ray structure and to each other, although using AMI-ESP partial atomic charges and a dielectric constant of 4, yielded the best protein structure.