First-principles calculations of the electronic band structure and lattice dynamics for the new superconductor MgB (2) are carried out and found to be in excellent agreement with our inelastic neutron scattering measurements. The numerical results reveal that the E(2g) in-plane boron phonons near the zone center are very anharmonic and strongly coupled to the planar B sigma bands near the Fermi level. This giant anharmonicity and nonlinear electron-phonon coupling is key to quantitatively explaining the observed high T(c) and boron isotope effect in MgB (2).