Undoubtedly, the key of hydrothermal carbonization is the presence of water during thermochemical conversion. The water plays an active role in the processes as solvent, reactant and catalyst or catalyst precursor. This contribution is focusing on this ‘magic ingredient’ both from a fundamental chemical and process engineering point of view. The generic role of water during hydrothermal processes is discussed and specifically elaborated for hydrothermal carbonization. It will be shown how and why reactions are enabled that cannot to be realized with dry thermochemical conversion. The high reactivity of the polar components of biomass in hot compressed water and its changing properties with temperature are the key to obtain high selectivities of desired products. Next to this key role in the chemistry of hydrothermal carbonization, water also proves to be a significant parameter in designing an efficient process. Experiments will be shown that point out the significant influence of the ratio of water to biomass on the energetic efficiency, both of the carbonization reaction itself and the process as a whole. The major inefficiency of the reaction is associated with dissolved organics in the process water. ... mehrIt can be reduced significantly by changing the ratio of water to biomass. In addition, heat demand of the process can be reduced. The heating of water represents a challenge for high process efficiency although evaporation of water can be avoided – a fact which is sometimes ignored when discussing the feasibility of hydrothermal carbonization for producing an energy carrier. These two aspects already point out fundamental limits to the process but also show potential for future applications.