Although life as we know it evolved in an aqueous medium, the properties of water are not completely understood. In this review, we focus on the role of water in guiding protein folding and stability. Specifically, we discuss the mechanisms of protein folding in an aqueous environment, the effects of water on the folding energy landscape as well as the transition state ensemble, and interactions of water with the folded state. We show that water cannot be viewed as a passive solvent, but rather, plays a very active role in the life of a protein.