The different states and locations of water within the cellulose matrix can be studied by the use of time domain low field NMR. In this work we show how the state and location of water associated with cellulose in filter paper fibers are affected by enzymatic hydrolysis. Three locations of water were identified in the filter paper; (1) bound water associated with the microfibril surfaces and (2) water in the cell wall or cellulose matrix and (3) capillary water in the lumens and between fibers. The different mechanisms of cellulase enzymes can be seen in their effect on the cellulose-water interactions and the synergistic effects between endo- and exo enzymes can be easily detected by time domain NMR. An interesting observation is that it is possible to link the state and location of water within the cellulose fiber with structural changes upon enzymatic hydrolysis.