The effect of water solvation on the structure and stability of cyclic dimers of urea has been investigated with the aid of density functional theory at the B3LYP/6-311++G** level. Several hydration models have been discussed. Specific solvent effects have been simulated through single and multiple water-urea interactions involving all the hydration sites of urea. The bulk solvent effects have been estimated through polarised continuum models. Under all the hydration patterns cyclic dimers continue to be stable structures although the solvent weakens the urea-urea interaction. Single and multiple specific urea-water interactions are competitive with urea dimerisation. The anticooperative nature of the two intermolecular interactions is largely due to the changes on sigma- and pi-electron density of urea caused by hydrogen bonding with water. The stability of the dimer is however, lost within a few ps when the hydrated dimer is described by a quantum mechanical molecular dynamics approach (ADMP). The cyclic dimer evolves towards structures where urea molecules are linked not more directly but through water molecules which have a bridge function.