Molecular dynamics simulations were carried out for concentrated aqueous solutions of three dipeptides: Gly-Ala, Gly-Pro, and Ala-Pro. The simulations were performed using both polarizable and nonpolarizable force fields, as a method of assessing the effects of polarization in a well-characterized biomolecular system, and to determine whether the models are adequate to reproduce observed aggregation behavior. The structure and dynamics of both solute and solvent were analyzed and the results compared to experiment, including neutron diffraction measurements of peptide aggregation. The polarizable water is depolarized in concentrated peptide solutions, reflecting its ability to adapt to heterogeneous electrostatic environments. Significant differences between the polarizable and nonpolarizable models are found in terms of both the structure and the dynamics of water as a solvent. Although the water shows more realistic structure and dynamics in the polarizable simulations, consistent with enhanced peptide-water interaction, the peptide aggregation behavior agrees less well with the experiment. Neither model successfully reproduces the experimentally observed dipeptide aggregation behavior.