Molecular dynamics simulations are used to study the structure and dynamics of poly(vinyl alcohol) and water in aqueous solution as a function of concentration at different temperatures in the range of 278-338 K. Simulations were performed using multiple oligomeric chains for facilitating interchain interactions as well as a direct comparison with experimental data. PVA chains fold and bundle up to form an aggregate in solution. The intermolecular spatial distributions show the structure of aggregate to be ordered. PVA chains show a high tendency to form intrachain hydrogen bonds between adjacent repeating units, instead of interchain H-bonds, indicating hydrophobic effect as the major driving force for aggregate formation. At all temperatures, the conformations of a single PVA chain by itself in solution are unstable, going back and forth between extended and folded states. However, interchain interactions among PVA chains in the aggregate stabilize the folded conformation. An increase in temperature results in faster motions and an increase in concentration results in slower dynamics. At higher concentration, the chains adopt a single folded state independent of temperature so that there is an insignificant effect on R-g. The competition between the formation of various hydrogen bonds such as intrachain, interchain, and PVA-water is the key to understand the solvation behavior of PVA. The activation energy for the conformational transition between the trans and gauche states of backbone dihedrals obtained from the simulations is 15.73 kJ/mol, which is close to the value of 13.4 kJ/mol obtained from experiments for 15 wt % PVA solution. The hydrophobic effect rather than interchain PVA hydrogen bonding is the major driving force for the aggregation of PVA in water.