Diacylglycerol kinase is an integral membrane protein which catalyzes phosphoryl transfer from ATP to diacylglycerol. As the smallest kinase known, it shares no sequence homology with conventional kinases and possesses a distinct trimer structure. Thus far, its catalytic mechanism remains elusive. Using molecular dynamics and quantum mechanics calculations, we investigated the co-factor and the substrate binding and phosphoryl transfer mechanism. Based on the analysis of density functional theory calculations, we reveal that the phosphorylation reaction of diacylglycerol kinase features the same phosphoryl transfer mechanism as other kinases, despite its unique structural properties. Our results further show that the active site is relatively open and able to accommodate ligands in multiple orientations, suggesting that the optimization of binding orientations and conformational changes would occur prior to actual phosphoryl transfer.