An investigation of the molecular interaction within a hydrogel system was conducted using molecular dynamics simulation, and the interaction mechanism of a polyacrylamide/polyvinyl alcohol (PAM/PVA) hydrogel system was examined specifically at the molecular level. Several characteristics of the PAM/PVA composite hydrogel system that are largely dependent on water content and temperature were studied in this paper, such as cohesive energy density, binding energy, mechanical properties and pair correlation function. The cohesive energy density and binding energy of the hydrogel system increased with higher water content. Results also showed that increased temperatures led to a decrease in the cohesive energy density of the system, while binding energy remained unchanged. The mechanical properties of the system were evaluated by analyzing the static mechanic performance. Results showed that elastic coefficients, engineering modulus and ductility decreased with increasing water content and temperature. In addition, analysis of the pair correlation function revealed mainly hydrogen bonding interactions between H2O molecules and surrounding atoms or functional groups. Results also indicated that the strength of these hydrogen bonds was O-water > O-PVA > O-PAM > N-PAM, confirming both the potential and the difficulty of hydrogen bond formation. The aforementioned findings help in understanding the interaction mechanisms between the components of a hydrogel system and in demonstrating the effects of water content and temperature on the PAM/PVA hydrogel system, which provides useful information on the possible operating windows of a biomedical hydrogel-making process.