Two-pulse photon echo spectroscopy for dipolar solutes in water is studied via equilibrium and nonequilibrium molecular dynamics (MD) simulations, By extension of the valence-bond description employed in our earlier MD work [Bursulaya, B. D.; Zichi, D. A.; Kim, H. J. J. Phys. Chem. 1995, 99, 10069; 1996, 100, 1392], both the solute ground- and excited-state electronic polarizabilities are incorporated into the simulations. By modulation of the static transition frequency distribution and solvation dynamics, the state-dependent solute electronic structure variation is found to have a significant influence on the echo; its relaxation behavior with pulse delay is slower for a polarizable solute than for a nonpolarizable one. Despite their similar overall effects, however, the ground- and excited-state polarizabilities modulate the echo via rather different mechanisms, Equilibrium and nonequilibrium MD yields similar results for a nonpolarizable solute but discernible differences for a polarizable solute.