Time-resolved infrared spectroscopy has the potential to provide unprecedented information about molecular dynamics in liquids. In the case of water, one of the most exciting techniques being developed is transient hole-burning. From experiments on dilute HOD in DO one can obtain the transition frequency time-correlation function for the OH stretch, finding that it decays on a time scale of between 0.5 and 1 ps. In this report we provide a molecular-level interpretation of this spectral diffusion in terms of the dynamics of forming and breaking hydrogen bonds. (C) 2003 Elsevier Science B.V. All rights reserved.