Free-radical copolymerization of 2-hydroxyethyl methacrylate with 2-hydroxyethyl acrylate can be successively utilized for the synthesis of water-soluble polymers and hydrogels with excellent physicochemical properties, thus showing promise for pharmaceutical and biomedical applications. In the work presented it has been demonstrated that water-soluble copolymers based on 2-hydroxyethyl methacrylate and 2-hydroxyethyl acrylate exhibit lower critical solution temperature in aqueous solutions, whereas the corresponding high molecular weight homopolymers do not have this unique property. The temperature-induced transitions observed upon heating the aqueous solutions of these copolymers proceed via liquid-liquid phase separation. The hydrogels were also synthesized by copolymerizing 2-hydroxyethyl methacrylate and 2-hydroxyethyl acrylate in the absence of a bifunctional cross-linker. The cross-linking of these copolymers during copolymerization is believed to be due to the presence of bifunctional admixtures or transesterification reactions. Transparency, swelling behavior, mechanical properties, and porosity of the hydrogels are dependent upon the monomer ratio in the copolymers. Hydrogel samples containing more 2-hydroxyethyl methacrylate are less transparent, have lower swelling capacity, higher elastic moduli, and pores of smaller size. The assessment of the biocompatibility of the copolymers using the slug mucosal irritation test revealed that they are also less irritant than poly(acrylic acid).