A QM/QM' direct molecular dynamics study of a water-accelerated Diels-Alder reaction in aqueous solution is reported. Cyclopentadiene and methyl vinyl ketone are known to react faster in water than in nonpolar solvents. We have explored how polarization of water molecules afforded by PM3 influences the nature of the transition state, and the reaction dynamics. We compare the results with previous studies on QM/MM and QM/MM+3QM water simulations from our laboratory. Transition state sampling in vacuum PM3 water boxes indicates that the asynchronicity is 0.54 angstrom in QM/QM', as compared to 0.48 angstrom in QM/MM, and 0.54 angstrom in QM/MM+3QM water. The mean time gap between the formation of two C-C bonds is 19 fs for QM/QM', compared to 20 fs for QM/MM, and 25 fs for QM/MM+3QM water. The samplings and time gaps are qualitatively consistent, indicating that water polarization is not significant in sampling and dynamics of bonding changes. The dynamics of hydrogen bonding between reacting molecules and water molecules was also analyzed. From reactants to transition states, H-bond shortening is 0.4 angstrom by QM/QM', while only 0.15 angstrom for QM/MM and QM/MM+3QM water. From reactants to transition states, the mean value of the H-bond angle increases by 19 degrees in QM/QM', but only 4 degrees in QM/MM, and 10 degrees in QM/MM+3QM water. These suggest that water polarization is essential for the correct representation of dynamical formation of hydrogen bonds in the transition state by water reorientation. QM/QM' overestimates the hydrogen bonding enhancement because of its underestimation of neutral hydrogen bonding within the reactants, a general deficiency of PM3.