The S(N)2 displacement of chloride from haloalkanes methyl chloride and 1,2-dichloroethane by a series of carboxylate nucleophiles is characterized using ab initio calculations. Comparison of reactivities of methyl chloride and 1,2-dichloroethane in the gas phase and aqueous solution reveals that relative reactivities of these two haloalkanes depend on the reaction environment. 1,2-Dichloroethane is more reactive in the gas phase than methyl chloride, but the order of reactivities is reversed in water. The origin of this effect is analyzed. The activation free energy barrier for the reaction between acetate and 1,2-dichloroethane is 25 kcal/mol (104.6 kJ/mol) in the aqueous environment. A similar reaction is catalyzed by the enzyme haloalkane dehalogenase with activation barrier of 15.3 kcal/mol (64.0 kJ/mol). The origin of this 10 kcal/mol (41.8 kJ/mol) catalytic effect is investigated by calculating how activation free energies depend on the dielectric constant of medium. Comparison of results obtained for the water environment and for the model of the active site environment indicates that a large percentage of this rate acceleration can be explained by the general hydrophobic nature of the active site. The enzyme also uses specific interactions with the chloride atom to facilitate the departure of this leaving group. We find that a single active site tryptophan residue interacts significantly more strongly with the leaving group in the transition state than in the ground state.