Standard molecular mechanics (MM) force fields predict a nearly linear decrease in hydration free energy with each successive addition of a methyl group to ammonia or acetamide, whereas a nonadditive relationship is observed experimentally. In contrast, the non-additive hydration behavior is reproduced directly using a quantum mechanics (QM)/MM-based free-energy perturbation (FEP) method wherein the solute partial atomic charges are updated at every window. Decomposing the free energies into electrostatic and van der Waals contributions and comparing the results with the corresponding free energies obtained using a conventional FEP method and a QM/MM method wherein the charges are not updated suggests that inaccuracies in the electrostatic free energies are the primary reason for the inability of the conventional FEP method to predict the experimental findings. The QM/MM-based FEP method was subsequently used to evaluate inhibitors of the diabetes drug target fructose-1,6-bisphosphatase adenosine 5'-monophosphate and 6-methylamino purine riboside 5'-monophosphate. The predicted relative binding free energy was consistent with the experimental findings, whereas the relative binding free energy predicted using the conventional FEP method differed from the experimental finding by an amount consistent with the overestimated relative solvation free energies calculated for alkylamines. Accordingly, the QM/MM-based FEP method offers potential advantages over conventional PEP methods, including greater accuracy and reduced user input. Moreover, since drug candidates often contain either functionality that is inadequately treated by MM (e.g., simple alkylamines and alkylamides) or new molecular scaffolds that require time-consuming development of MM parameters, these advantages could enable future automation of PEP calculations as well as greatly increase the use and impact of FEP calculations in drug discovery.