The mode of action of the tungstoprotein, acetylene hydratase, is unresolved at present. We have carried out density functional theory (DFT) calculations to investigate two proposed mechanisms, and also propose a new mechanism based on our calculations. We find that the previously proposed single step mechanisms which involve the attack of a water molecule, catalysed by Asp13, have barriers greater than 40 kcal mol⁻¹. We propose a new mechanism which involves two tungsten complexes, a vinylidene and a carbene, as stable intermediates. We calculate the potential energy surfaces for their formation, and for the decomposition of the carbene complex to yield acetaldehyde. All the barriers along the pathway are less than 30 kcal mol⁻¹, except for the barrier to carbene formation which is 34 kcal mol⁻¹.