This paper examines the role of water in hydrated poly(2-hydroxyethyl methacrylate) (PHEMA). Dielectric complex permittivity measurements are reported over an extended range of frequency (0.1 Hz-1 GHz) and temperature (77-353 K) with water content as a disposable parameter. Data are correlated with the results of earlier relaxation experiments, notably nuclear magnetic resonance, to provide insight into water-polymer interactions at the molecular level. Three relaxations are detected in the dry polymer, whereas, in the hydrated system, a fourth relaxation is identified and attributed to a low-temperature phase transition of the water itself. Relaxation processes of the host polymer are strongly influenced by the presence of water.