The visual receptor rhodopsin constitutes an important archetype for studying how membrane lipids and water (soft matter) affect G-protein-coupled receptor (GPCR) activation and effector binding [1]. Although membrane lipid properties are known to couple to rhodopsin conformational changes upon activation, the role of water remains an enigma [2,3]. To address this, we combined osmotic stress techniques with transducin (G t) binding studies to determine the effect of rhodopsin internal hydration on G-protein interactions. We hypothesized that rhodopsin hydration/dehydration cycling couples to G t activation within membranes. Here we measured changes in the affinity of G t and a C-terminal peptide analogue of G t binding to photoactivated rhodopsin in response to controlled dehydration. Rhodopsin hydration was modulated upon incubation with polyethylene glycol (PEG) of various molecular masses, and the active metarhodopsin-II (MII) fraction of rhodopsin was obtained using UV-visible spectrophotometry. We discovered that dehydration of the rhodopsin core by large molar mass PEGs reduces its affinity for G t and the peptide, yet the affinity of rhodopsin for both substrates was increased in the presence of small molar mass PEGs which penetrate the protein core. These findings support our sponge model of GPCR signaling, in which a massive hydration event accompanies rhodopsin activation and facilitates binding of the G t effector. Formation of the rhodopsin-tranducin complex displaces water from the protein interior and destabilizes the open conformation of the receptor. Closure of the G t binding cleft yields release of activated transducin. This wet/dry cycle can repeat many times for one photoexcitation event, explaining how many molecules of G t can be activated per molecule of rhodopsin. [1] A.R. Eitel et. al. (2019) Biophys. J. 116,176a. [2] M.F. Brown (2017) Annu. Rev. Biophys. 46:379-410. [3] S.D.E. Fried et. al. (2019) Biophys. J. 116,207a.