Semiempirical SCF-MO studies of tautomerism in alloxan preclude the possibility of direct proton transfer in the gas phase due to the strain in the four-centred transition state, in which the proton being transferred is forced to come close to the positively charged carbon atom at the opposite corner of the four-membered ring. However, in aqueous solution, the activation barrier reduces appreciably, not only due to reduction in strain, but also due to charge separation in the transition state, which is stabilized due to ionic resonance. The N-H bond is almost broken, while the O-H bond is only partially formed in the transition state. The other stabilizing effect in aqueous solution is due to bulk solvent dielectric effects, which stabilize the transition state to a greater extent due to its higher dipole moment. Although the transition states for proton transfer to the neighbouring oxygen atoms on either side have comparable energies, as the mechanisms of proton transfer leading to the formation of the 2-hydroxy and 4-hydroxy tautomers are similar, bulk solvent effects are larger in the latter due to the higher dipole moment of the transition state. The reason is the almost complete separation of the two entities, i.e. the alloxan anion and the hydronium ion in the latter case, indicating that in this case a dissociative mechanism of the kind encountered in acid-base equilibria is operating.