Temperature-induced phase separation and hydration in poly(N-vinylcaprolactam) (PVCL)–D2O solutions were investigated by a combination of NMR and ATR FTIR spectroscopy, SAXS and model quantum-chemical calculations. The existence and character of water bound in PVCL globular-like structures were shown by NMR spin–spin relaxation times of HDO molecules and by FTIR spectroscopy. From FTIR spectra combined with DFT calculations it follows that the amount of fully dehydrated carbonyl groups in PVCL globular structures is rather small. Dehydration at temperatures above the LCST transition mainly consists of transformation of structures where a PVCL carbonyl is directly hydrogen bonded to two water molecules to structures with a single hydrogen bonded water molecule and breaking away indirectly bound water. In the transition region the changes of hydrophilic and hydrophobic interactions proceed simultaneously. The strong dependence of transition temperatures on polymer concentration was revealed by NMR and SAXS. NMR spectroscopy also enabled us to determine thermodynamic parameters ΔH and ΔS characterizing the phase transition. SAXS results have shown that above the transition temperature “primary” mesoglobules of 50 nm in size are formed which aggregate into large agglomerates.