We present in detail the calculation of the O(\a_s) virtual corrections to
the matrix element for b \to s \g. Besides the one-loop virtual corrections
of the electromagnetic and color dipole operators O7 and O8, we include
the important two-loop contribution of the four-Fermi operator O2. By
applying the Mellin-Barnes representation to certain internal propagators, the
result of the two-loop diagrams is obtained analytically as an expansion in
mc/mb. These results are then combined with existing O(\a_s)
Bremsstrahlung corrections in order to obtain the inclusive rate for B \to X_s
\g. The new contributions drastically reduce the large renormalization scale
dependence of the leading logarithmic result. Thus a very precise Standard
Model prediction for this inclusive process will become possible once also the
corrections to the Wilson coefficients are available.Comment: 29 pages, uses epsfig.sty, 12 postscript figures include