The molecular mechanism of hairpin ribozyme catalysis is studied with molecular dynamics simulations using a combined quantum mechanical and molecular mechanical (QM/MM) potential with a recently developed semiempirical AM1/d-PhoT model for phosphoryl transfer reactions. Simulations are used to derive one- and two-dimensional potentials of mean force to examine specific reaction paths and assess the feasibility of proposed general acid and base mechanisms. Density-functional calculations of truncated active site models provide complementary insight to the simulation results. Key factors utilized by the hairpin ribozyme to enhance the rate of transphosphorylation are presented, and the roles of A38 and G8 as general acid and base catalysts are discussed. The computational results are consistent with available experimental data, provide support for a general acid/base mechanism played by functional groups on the nucleobases, and offer important insight into the ability of RNA to act as a catalyst without explicit participation by divalent metal ions.