The heme of horseradish peroxidase is buried in the protein, but a channel from the protein surface connects the aqueous solution to the heme site. Ferric horseradish peroxidase has an absorption band at 640 nm that is attributed to a charge-transfer (CT) transition between the a(2u) HOMO of T electrons of the porphyrin ring and the d(xy)/d(yz) orbital of the ferric ion. Because the water channel extends to the Fe, it seems likely that the CT band will be sensitive to the hydration of the protein. To study this premise, the protein was incorporated into trehalose/sucrose glasses and the hydration of the sugar glasses was varied. Absorption spectra of HRP in sugar glasses and in glycerol/water were taken in the range 10-300 K. The CT absorption band shows vibronic fine structure. The peak positions are the same in hydrated sugar and glycerol/water but the peak positions change in desiccated sugar glass. The data suggest that in hydrated, but not desiccated, sugar glass, water is retained in the heme pocket. Binding of the competitive inhibitor benzohydroxamic acid to the protein increases the CT absorption and resolution. The effect of benzohydroxamic acid on the Fe as calculated using a combination of density functional theory and molecular mechanics is to stabilize the spin state 3/2 with respect to 5/2. At low temperature the widths of the lines in the CT band are narrower for the protein in glycerol/water (glass transition at similar to150 K) than in trehalose/sucrose (glass formation at 65 degreesC). This indicates that the CT band is inhomogeneously broadened and sensitive to the solvent. The spectral narrowing of the CT absorption occurs as the temperature decreases over the temperature range studied. Water, as indicated by the OH stretch, also shifts in this range. The findings are discussed in terms of how buried water and nearby charges can modulate the activity of the heme.