Despite much experimental and computational study, key aspects of the mechanism of reduction of dihydrofolate (DHF) by dihydrofolate reductase (DHFR) remain unresolved, while the secondary DHFR-catalyzed reduction of folate has been little studied. Major differences between proposed DHF mechanisms are whether the carboxylate group of the conserved active-site Asp or Glu residue is protonated or ionized during the reaction, and whether there is direct protonation of N5 or a proton shuttle from an initially protonated carboxylate group via O4. We have addressed these questions for both reduction steps with a comprehensive set of ab initio quantum chemical calculations on active-site fragment complexes, including the carboxyl side chain and, progressively, all other polar active-site residue groups including conserved water molecules. Addition of two protons in two steps was considered. The polarization effects of the remainder of the enzyme system were approximated by a dielectric continuum self-consistent reaction field (SCRF) model using an effective dielectric constant (epsilon) of 2. Optimized geometries were calculated using the density functional (B3LYP) method and Onsager SCRF model with the 6-31G basis. Single-point energy calculations were then carried out at the B3LYP/6-311+G level with either the Onsager or dielectric polarizable continuum model. Additional checking calculations at MP2 and HF levels, or with other basis sets or values of epsilon, were also done. From the results, the conserved water molecule, corresponding to W206 in the E. coli DHFR complexes, that is H-bonded to both the OD2 oxygen atom of the carboxyl (Asp) side chain and O4 of the pterin/dihydropterin ring, appears critically important and may determine the protonation site for the enzyme-bound substrates. In the absence of W206, the most stable monoprotonated species are the neutral-pair 4-enol forms of substrates with the carboxyl group OD2 oxygen protonated and H-bonded to N3. If W206 is included, then the most stable forms are still the neutral-pair complexes but now for the N3-H keto forms with the protonated OD2 atom H-bonding with W206. A second proton addition to these complexes gives protonations at N8 (folate) or N5 (DHF). Calculated H-bond distances correlate well with those for the conserved W206 observed in many X-ray structures. For all structures with occluded M20 loop conformations (closed active site), OD2-N3 distances are less than OD2-NA2 distances, which is consistent with those calculated for protonated OD2 complexes. Thus, the results (B3LYP; epsilon = 2 calculations) support a mechanism for both folate and DHF reduction in which the OD2 carboxyl oxygen is first protonated, followed by a direct protonation at N8 (folate) and N5 (DHF) to obtain the active cation complexes, i.e., doubly protonated. The results do not support a proposed protonated carboxyl with DHF in the enol form for the Michaelis complex, nor an ionized carboxyl with protonated enol-DHF as a catalytic intermediate. However, as additional calculations for the monoprotonated complete complexes show a reduction in the energy differences between the neutral-pair keto and ion-pair keto (N8- or N5-protonated) forms, we are extending the treatment using combined quantum mechanics and molecular mechanics (QM/MM) and molecular dynamics simulation methods to refine the description of the protein/solvent environment and prediction of the relative stabilization free energies of the various (OD2, O4, N5, and N8) protonation sites.