Terahertz time-domain spectroscopy was used to probe water dynamics in microcrystalline cellulose. In this study, the variation of the dielectric constant of water in microcrystalline cellulose samples with moisture contents between 2.65% and 16.73% was studied. It was found that the dielectric function of water does change with a change in moisture content in microcrystalline cellulose. The dielectric function of water appears to change from what might be expected for bound water towards values that are more consistent with bulk water at higher moisture content. This study is a step forward in the direction of understanding if the dielectric function of water goes from bound to free with a change in moisture content in microcrystalline cellulose. Future work to understand the detailed behavior of this transition is important for wood science and THz application to wood science.