Explicit solvent ab initio molecular dynamics simulations have been used to study the activation of the nitrogen mustards mechlorethamine and phosphoramide mustard into the aziridinium ion intermediates known to be involved in the alkylation of DNA. The simulations predict a concerted reaction occurring by way of neighboring-group participation with the nearby nucleophilic tertiary nitrogen, in agreement with previous theoretical studies. The calculated activation free energy of 20.4 kcal/mol for mechlorethamine agrees well with the value of 22.5 kcal/mol determined from available experimental data. Furthermore, these simulations indicate a dynamic transition state characterized by pronounced changes in the local water structure within the first hydration shell. Trajectories initiated from the transition-state region toward products reveal a reaction that proceeds directly to the solvent-separated ion pair. Failure to cross the transition state was observed in a small number of trajectories where the degree of coordination with the leaving group is less favorable for reaction. Direct vibrational excitation of mechlorethamine alone is not sufficient to induce reaction, even with energies far in excess of the activation energy. The simulations suggest that reactivity is strongly dependent on the degree of coordination and orientation of water molecules within the vicinity of the leaving group. The complete mechanism involving solvent reorganization, ionization of the C-Cl bond, and internal cyclization of the aziridinium ion ring was captured from elevated temperature simulations. Rate constants for aziridinium ion ring formation from both mechlorethamine and phosphoramide mustard (the alkylating moiety of cyclophosphamide) are calculated and compared with available pharmacokinetic data.