Significant changes in materials properties of siloxane based polymers can be obtained by the addition of inorganic fillers. In silica-filled polydimethylsiloxane (PDMS) based composites the mechanism of this reinforcing behavior is presumably hydrogen bonding between surface hydroxyls and backbone siloxane species. We have chosen to investigate in detail the effect of chemisorbed (hydroxyls) and physisorbed water on the interfacial structure and dynamics in silica-filled PDMS based composites. Toward this end, we have combined molecular dynamics simulations and experimental studies employing DMA and NMR analysis. Our results suggest that the polymer-silica contact distance and the mobility of interfacial polymer chains significantly decreased as the hydration (hydroxyl and/or physisorbed water) level at the interface was reduced. The reduced mobility of the PDMS chains in the interfacial domain reduced the overall motional properties of the polymer, thus causing an effective "stiffening" of the polymer matrix. The role of the long-ranged Coulombic interactions on the structural features and chain dynamics of the polymer were also examined. Both are found to be strongly influenced by the electrostatic interactions as identified by the bond orientation time correlation function and local density distribution functions. These results have important implications for the design of nanocomposite silica-siloxane materials.