Sir2 enzymes catalyze the NAD+-dependent protein deacetylation and play critical roles in epigenetics, cell death, and lifespan regulation. In spite of a current flurry of experimental studies, the catalytic mechanism for this unique and important class of enzymes remains elusive. Employing on-the-fly Born-Oppenheimer molecular dynamics simulations with the B3LYP/6-31G(d) QM/MM potential and the umbrella sampling method, we have characterized the initial step of the Sir2Tm-catalyzed reaction, which is also the most controversial portion of its mechanism. Our results indicate that the nicotinamide cleavage reaction employs a highly dissociative and concerted displacement mechanism: the cleavage of the glycosidic bond is facilitated by the nucleophilic participation of the acetyl-lysine, and the dissociative transition state has a significant oxocarbenium ion character. During this step of the reaction, the Sir2Tm enzyme strongly stabilizes the covalent O-alkylamidate intermediate whereas its effect on the transition state is quite minimal. In addition, functional roles of key residues and motifs have been elucidated. This work further demonstrates the feasibility and applicability of the state-of-the-art ab initio QM/MM molecular dynamics approach in simulating enzyme reactions.