The effect of annealing on the acidity and water uptake of Nafion films has been studied by using the acidity sensing fluorophore 2-(4'-pyridyl)benzimidazole (4PBI). The difference in acidity and the microenvironment of the fluorophore in annealed and nonannealed films is brought out in this study. The annealed film is found to have less water uptake than nonannealed films. The amount of water uptake increases upon acid treatment of the films, as all the steady-state and time-resolved behaviour of the molecule in nonannealed films is restored. These observations are rationalised by the formation of anhydrides upon annealing and their hydrolysis to sulfonic acid groups upon acid treatment. Interestingly, the acidity of annealed films is found to be even less than that of Na exchanged films, indicating that annealing removes more protons from the Nafion films than cation exchange can.