The proton transfer activity of the light-driven proton pump, bacteriorhodopsin (bR) in the photochemical cycle might imply internal water molecules. The free energy of inserting water molecules in specific sites along the bR transmembrane channel has been calculated using molecular dynamics simulations based on a microscopic model. The existence of internal hydration is related to the free energy change on transfer of a water molecule from bulk solvent into a specific binding site. Thermodynamic integration and perturbation methods were used to calculate free energies of hydration for each hydrated model from molecular dynamics simulations of the creation of water molecules into specific protein-binding sites. A rigorous statistical mechanical formulation allowing the calculation of the free energy of transfer of water molecules from the bulk to a protein cavity is used to estimate the probabilities of occupancy in the putative bR proton channel. The channel contains a region lined primarily by nonpolar side-chains. Nevertheless, the results indicate that the transfer of four water molecules from bulk water to this apparently hydrophobic region is thermodynamically permitted. The column forms a continuous hydrogen-bonded chain over 12 A between a proton donor, Asp 96, and the retinal Schiff base acceptor. The presence of two water molecules in direct hydrogen-bonding association with the Schiff base is found to be strongly favorable thermodynamically. The implications of these results for the mechanism of proton transfer in bR are discussed.