Methyldiazohydroxide is a proposed intermediate in the in vivo metabolic decomposition of carcinogenic N-nitroso compounds. Ab initio self-consistent field gradient techniques using a split-valence 4-21G basis set have been used to study the decomposition of methyldiazohydroxide, and it is found that the decomposition is unfavourable in the gas phase. Estimates of the hydration energy using both the supermolecule approach and empirical data suggest that the spontaneous decomposition may also be unfavourable in aqueous solution. However, as experiment shows, the decomposition occurs readily. Nevertheless, there are differences in the reactivity of cis and trans diazohydroxides and diazotates; it is therefore concluded that catalysis must be important in the decomposition.