Methyl peroxy, a key radical in tropospheric chemistry, was recently shown to react with the hydroxyl radical at an unexpectedly high rate. Here, the molecular reaction mechanisms are elucidated using high-level quantum chemical methodologies and statistical rate theory. Formation of activated methylhydrotrioxide, followed by dissociation into methoxy and hydroperoxy radicals, is found to be the main reaction pathway, whereas methylhydrotrioxide stabilization and methanol formation (from activated and stabilized methylhydrotrioxide) are viable minor channels. Criegee intermediate formation is found to be negligible. Given the theoretical uncertainties, useful constraints on the yields are provided by atmospheric methanol measurements. Using a global chemistry-transport model, we show that the only explanation for the high observed methanol abundances over remote oceans is the title reaction with an overall methanol yield of ∼30%, consistent with the theoretical estimates given their uncertainties. This makes the title reaction a major methanol source (115 Tg per year), comparable to global terrestrial emissions.