Hydrogen storage is a key enabling technology required for attaining a hydrogen-based economy. Fundamental research can reveal the underlying principles controlling hydrogen uptake and release by storage materials, and also aid in characterizing and designing novel storage materials. New ideas for hydrogen storage material come from exploiting the properties of hydrophobic hydration, which refers to water’s ability to stabilize, but its mode of association, specific structures under specific conditions. Although hydrogen was always considered too small to support the formation of solid clathrate hydrate structures, exciting new experiments (MAO, et al, PNAS, 2004) show that water traps hydrogen molecules at conditions of low temperatures and moderate pressures. Hydrogen release is accomplished by simple warming. While these experiments lend credibility to the idea the water could form an environmentally attractive alternative storage compound for hydrogen fuel, which would advance our nation’s goals of attaining a hydrogen-based economy, much work is yet required to understand and realize the full potential of clathrate hydrates of hydrogen storage. Here we undertake theoretical studies of hydrogen in water to establish a firm foundation for predictive work on clathrate hydrates H2 for hydrogen storage capabilities. Using molecular simulation and statistical mechanical theories based in part of quantum mechanical descriptions of molecular interactions, we characterize the interactions between hydrogen and liquid water in terms of structural and thermodynamic properties. In the process we validate classical force field models of hydrogen in water and discover new features of hydrophobic hydration that impact problems in both energy technology and biology. Finally, we predict hydrogen occupancy in the small and large cages of hydrogen clathrate hydrates, a property unresolved by previous experimental and theoretical work.