The sugar molecule trehalose has been proven to be an excellent stabilizing cosolute for the preservation of biological materials. However, the stabilizing mechanism of trehalose has been much debated during the previous decades, and it is still not fully understood, partly because it has not been completely established how trehalose molecules structure around proteins. Here, we present a molecular model of a protein water trehalose system, based on neutron scattering results obtained from neutron diffraction, quasielastic neutron scattering, and different computer modeling techniques. The structural data clearly show how the proteins are preferentially hydrated, and analysis of the dynamical properties show that the protein residues are slowed down because of reduced dynamics of the protein hydration shell, rather than because of direct trehalose protein interactions. These findings, thereby, strongly support previous models related to the preferential hydration model and contradict other models based on water replacement at the protein surface. Furthermore, the results are important for understanding the specific role of trehalose in biological stabilization and, more generally, for providing a likely mechanism of how cosolutes affect the dynamics of proteins.