Multiple approaches have been devised and evaluated to computationally estimate binding free energies. Results using a recently developed Quantum Mechanics (QM)/Molecular Mechanics (MM) based Free Energy Perturbation (FEP) method suggest that this method has the potential to provide the most accurate estimation of binding affinities to date. The method treats ligands/inhibitors using QM while using MM for the rest of the system. The method has been applied and validated for a structurally diverse set of fructose 1,6-bisphosphatase (FBPase) inhibitors suggesting that the approach has the potential to be used as an integral part of drug discovery for both lead identification lead optimization, where there is a structure available. In addition, this QM/MM-based FEP method was shown to accurately replicate the anomalous hydration behavior exhibited by simple amines and amides suggesting that the method may also prove useful in predicting physical properties of molecules. While the method is about 5-fold more computationally demanding than conventional FEP, it has the potential to be less demanding on the end user since it avoids development of MM force field parameters for novel ligands and thereby eliminates this time-consuming step that often contributes significantly to the inaccuracy of binding affinity predictions using conventional FEP methods. The QM/MM-based FEP method has been extensively tested with respect to important considerations such as the length of the simulation required to obtain satisfactory convergence in the calculated relative solvation and binding free energies for both small and large structural changes between ligands. Future automation of the method and parallelization of the code is expected to enhance the speed and increase its use for drug design and lead optimization.