Density functional calculations have been performed to rationalize the oxidation of carbon monoxide by [Cp2Mo(OH)(OH2)]+ (Cp = η5‐C5H5) to give carbon dioxide and [Cp2MoH(CO)]+. Our results show that the intramolecular nucleophilic mechanism is the most favored both in the gas phase and in water solution, which is in good agreement with experimental results. The rearrangement that takes place during the nucleophilic hydroxide attack with a simultaneous hydrogen migration to the molybdenum center is the rate‐determining step in the gas phase with a Gibbs energy barrier of 48.7 kcal mol–1. In water medium, however, this combined process takes place separately and passes through a new [Cp2Mo(COOH)]+‐type intermediate. The inclusion of one explicit water molecule in the continuum solvent model computations plays a crucial role to make the nucleophilic hydroxide attack the rate‐determining step in the overall reactive process with a Gibbs energy barrier in solution of 21.2 kcal mol–1. Besides this, our results have allowed us to rationalize the relatively low conversion of [Cp2Mo(OH)(OH2)]+ that was experimentally found.