Ab initio molecular dynamics methods have been used to study the reaction mechanism of acid-catalyzed addition of water to formaldehyde in a model system of an aqueous solution of sulfuric acid. Using the method of constraints we find that an H2O molecule can be added to formaldehyde by a controlled transfer of a catalytic proton from a hydronium ion in acid solution to the carbonyl oxygen. The formation of the CO bond between the carbonyl carbon and the water oxygen occurs at a stage midway in the proton transfer process. The process can be reversed by removing the H+ from the protonated product diol, leading to CO bond breaking at approximately the same stage of proton transfer. This suggests that the kinetics of the acid-catalyzed reaction is governed by a concerted protonation and addition.