New insights into the detailed mechanism of the hydration of ketene yielding acetic acid (H2C=C=O + H2O --> CH3COOH) were obtained by theoretical methods in both gas phase and solution. While gas phase calculations were performed using ab initio molecular orbital theory, bulk solvent effects were included using the self-consistent reaction field method (SCRF) and the polarizable continuum model (PCM). The hydration modeled by attack of water clusters containing two, three, and four water molecules confirms that a two-step addition of water to the ketene C=O bond, yielding a 1,1-enediol intermediate as initially demonstrated in 1984, is energetically, slightly but consistently, preferred over a concerted addition across the C=C bond leading directly to the acid product. Attempts to locate a zwitterion intermediate in solution were not successful. At least a cluster of three hydrogen-bonded water molecules is present in the gas phase supersystem to facilitate the proton transfer. Further incorporation of active water molecules in the catalytic water chain induces rather minor energetic improvements on the proton relay, which indicates a certain saturation of the cluster when reaching 3-4 water molecules. Effects of the surrounding solvent bulk do not change qualitatively the facts found in gas phase. The C=O addition mechanism is in better agreement with recent experimental developments in identifying enols of carboxylic acids than other mechanisms involving either a zwitterion or a direct C=C addition, as proposed for years in the Literature.