Developing a ligand with high affinity for a specific protein target is essential for drug design, and water molecules are well known to play a key role in protein-drug recognition. However, predicting the role of particularly ordered water molecules in drug binding remains challenging. Furthermore, hydration free energy contributed from the water network, including the second shell of water molecules, is far from being well studied. In this research we focused on these aspects to accurately and efficiently evaluate water effects in protein-ligand binding affinity. We developed a new strategy using a free-energy calculation method, VM2. We successfully predicted the stable ordered water molecules in a number of protein systems: PDE 10a, HSP90, tryptophan synthase (TRPS), CDK2 and Factor Xa. In some of these, the second shell of water molecules appeared to be critical in protein-ligand binding. We also applied the strategy to largely improve binding free energy calculation using the MM/PBSA method. When applying MM/PBSA alone for two systems, CDK2 and Factor Xa, the computed binding free energy resulted in poor to moderate R2 values with experimental data. However, including water free energy correction greatly improved the free energy calculation. Furthermore, our work helped to explain how xk263 is a 1000 times faster binder to HIVp than ritonavir, a potentially useful tool for investigating binding kinetics. Our studies reveal the importance of fully considering water effects in therapeutic developments in pharmaceutical and biotechnology industries and for fundamental research in protein-ligand recognition.