The mechanistic role of water in the deamidation of a model asparagine‐containing hexapeptide (Val‐Tyr‐Pro‐Asn‐Gly‐Ala) in lyophilized formulations containing poly(vinylpyrrolidone) (PVP) and glycerol was investigated. Glycerol was used as a plasticizer to vary formulation glass transition temperature (Tg) without significantly changing water content or activity. Increases in moisture and glycerol contents increased the rate of peptide deamidation. This increase was strongly correlated with Tg at constant water content and activity, suggesting that increased matrix mobility facilitates deamidation. In rubbery systems (T >Tg), deamidation rates appeared to be independent of water content and activity in formulations with similar Tgs. However, in glassy formulations with similar Tgs, deamidation increased with water content, suggesting a solvent/medium effect of water on reactivity in this regime. An increase in water content also affected the degradation product distribution; less of the cyclic imide intermediate and more of the hydrolytic products, isoAsp‐ and Asp‐hexapeptides, were observed as water content increased. Thus, residual water appears to facilitate deamidation in these solid PVP formulations both by enhancing molecular mobility and by solvent/medium effects, and also participates as a chemical reactant in the subsequent breakdown of the cyclic imide.