Solar cells comprising methylammonium lead iodide perovskite (MAPI) are notorious for their sensitivity to moisture. We show that hydrated crystal phases are formed when MAPI is exposed to water vapour at room temperature and that these phase changes are fully reversed when the material is subsequently dried. The reversible formation of CH 3 NH 3 PbI 3 •H 2 O followed by (CH 3 NH 3 ) 4 PbI 6 •2H 2 O (upon long exposure times) was observed using time resolved XRD and ellipsometry of thin films prepared using 'solvent engineering', single crystals, and state of the art solar cells. In contrast to water vapour, the presence of liquid water results in the irreversible decomposition of MAPI to form PbI 2 . MAPI changes from dark brown to transparent on hydration; the precise optical constants of CH 3 NH 3 PbI 3 •H 2 O formed on single crystals were determined, with a bandgap at 3.1 eV. Using the single crystal optical constants and thin film ellipsometry measurements, the time dependent changes to MAPI films exposed to moisture were modelled. The results suggest that the mono-hydrate phase forms independently of the depth in the film suggesting rapid transport of water molecules along grain boundaries. Vapour phase hydration of an unencapsulated solar cell (initially J sc ≈ 19 mA cm -2 and V oc ≈ 1.05 V at 1 sun) resulted in more than a 90 % drop in short circuit photocurrent and around 200 mV loss in open circuit potential, but these losses were fully reversed after the cell was exposed to dry nitrogen for 6 hours. Hysteresis in the current-voltage characteristics was significantly increased after this dehydration, which may be related to changes in the defect density and morphology of MAPI following recrystallization from the hydrate. Based on our observations we suggest that irreversible decomposition of MAPI in the presence of water vapour only occurs significantly once a grain has been fully converted to the hydrate phase.