The retention and displacement of water molecules during formation of ligand-protein interfaces play a major role in determining ligand binding. Understanding these effects requires a method for positioning of water molecules in the bound and unbound proteins and for defining water displacement upon ligand binding. We describe an algorithm for water placement and a calculation of ligand-driven water displacement in >9000 protein-ligand complexes. The algorithm predicts approximately 38% of experimental water positions within 1.0 Å and about 83% within 1.5 Å. We further show that the predicted water molecules can complete water networks not detected in crystallographic structures of the protein-ligand complexes. The algorithm was also applied to solvation of the corresponding unbound proteins, and this allowed calculation of water displacement upon ligand binding based on differences in the water network between the bound and unbound structures. We illustrate use of this approach through comparison of water displacement by structurally related ligands at the same binding site. This method for evaluation of water displacement upon ligand binding may be of value for prediction of the effects of ligand modification in drug design.