We have identified a distal point mutation in streptavidin that causes a 1000-fold reduction in biotin binding affinity without disrupting the equilibrium complex structure. The F130L mutation creates a small cavity occupied by a water molecule; however, all neighboring side chain positions are preserved, and protein-biotin hydrogen bonds are unperturbed. Molecular dynamics simulations reveal a reduced mobility of biotin binding residues but no observable destabilization of protein-ligand interactions. Our combined structural and computational studies suggest that the additional water molecule may affect binding affinity through an electronic polarization effect that impacts the highly cooperative hydrogen bonding network in the biotin binding pocket.