Human serum albumin (HSA) plays an important role in the transport and disposition of endogenous and exogenous ligands present in blood. Its capacity to reversibly bind a large variety of drugs results in its prevailing role in drug pharmacokinetics and pharmacodynamics. In this work, we used 7-hydroxyquinoline (7HQ) as a probe to study the binding nature of one of the major drug binding sites of HSA (Sudlow I) and to reveal the local environment around the probe in the binding site. The interaction between 7HQ and HSA at a physiological pH of 7.2 was investigated using steady-state and lifetime spectroscopic measurements, molecular docking and molecular dynamics (MD) simulations methods. The fluorescence results indicate a selective interaction between 7HQ and the Trp214 residue. The reduction in both the intensity and lifetime of the Trp214 fluorescence upon probe binding indicates the dominant role of static quenching. Molecular docking and MD simulations show that 7HQ binds in Sudlow site I close to Trp214, confirming the experimental results, and pinpoint the dominant role of hydrophobic interaction in the binding site. Electrostatic interactions were also found to be important in which two water molecules form strong hydrogen bonds with the polar groups of 7HQ. Detection of water in the binding site agrees with the absorption and fluorescence results that show the formation of a zwitterion tautomer of 7HQ. The unique spectral signatures of 7HQ in water make this molecule a potential probe for detecting the presence of water in nanocavities of proteins. Interaction of 7HQ with water in the binding site shows that water molecules can be crucial for molecular recognition and association in protein binding sites.