We report the first computational study of a fully atomistic model of the ruthenium-catalyzed transfer hydrogenation of formaldehyde and the reverse reaction in an explicit methanol solution. Using ab initio molecular dynamics techniques, we determined the thermodynamics, mechanism, and electronic structure along the reaction path. To assess the effect of the solvent quantitatively, we make a direct comparison with the gas-phase reaction. We find that the energy profile in solution bears little resemblance to the profile in the gas phase and a distinct solvation barrier is found: the activation barriers in both directions are lowered and the concerted hydride and proton transfer in the gas phase are converted into a sequential mechanism in solution with the substrate appearing as methoxide-like intermediate. Our results indicate that besides the metal-ligand bifunctional mechanism, as proposed by Noyori, also a concerted solvent-mediated mechanism is feasible. Our study gives a new perspective of the active role a solvent can have in transition-metal-catalyzed reactions.