The ionization properties of Lys and Glu residues buried in the hydrophobic core of staphylococcal nuclease (SN) suggest that the interior of this protein behaves as a highly polarizable medium with an apparent dielectric constant near 10. This has been rationalized previously in terms of localized conformational relaxation concomitant with the ionization of the internal residue, and with contributions by internal water molecules. Paradoxically, the crystal structure of the SN V66E variant shows internal water molecules and the structure of the V66K variant does not. To assess the structural and dynamical character of interior water molecules in SN, a series of 10-ns-long molecular dynamics (MD) simulations was performed with wild-type SN, and with the V66E and V66K variants with Glu66 and Lys66 in the neutral form. Internal water molecules were identified based on their coordination state and characterized in terms of their residence times, average location, dipole moment fluctuations, hydrogen bonding interactions, and interaction energies. The locations of the water molecules that have residence times of several nanoseconds and display small mean-square displacements agree well with the locations of crystallographically observed water molecules. Additional, relatively disordered water molecules that are not observed crystallographically were found in internal hydrophobic locations. All of the interior water molecules that were analyzed in detail displayed a distribution of interaction energies with higher mean value and narrower width than a bulk water molecule. This underscores the importance of protein dynamics for hydration of the protein interior. Further analysis of the MD trajectories revealed that the fluctuations in the protein structure (especially the loop elements) can strongly influence protein hydration by changing the patterns or strengths of hydrogen bonding interactions between water molecules and the protein. To investigate the dynamical response of the protein to burial of charged groups in the protein interior, MD simulations were performed with Glu66 and Lys66 in the charged state. Overall, the MD simulations suggest that a conformational change rather than internal water molecules is the dominant determinant of the high apparent polarizability of the protein interior.