We performed molecular dynamics simulations of the collapse of a two-domain protein, the BphC enzyme, into a globular structure to examine how water molecules mediate hydrophobic collapse of proteins. In the interdomain region, liquid water persists with a density 10 to 15% lower than in the bulk, even at small domain separations. Water depletion and hydrophobic collapse occur on a nanosecond time scale, which is two orders of magnitude slower than that found in the collapse of idealized paraffin-like plates. When the electrostatic protein-water forces are turned off, a dewetting transition occurs in the interdomain region and the collapse speeds up by more than an order of magnitude. When attractive van der Waals forces are turned off as well, the dewetting in the interdomain region is more profound, and the collapse is even faster.