One-step perturbation is an efficient method to estimate free energy differences in molecular dynamics (MD) simulations, but its accuracy depends critically on the choice of an appropriate, possibly unphysical, reference state that optimizes the sampling of the physical end states. In particular, the perturbation from a polar moiety to a nonpolar one and vice versa in a polar environment such as water poses a challenge which is of importance when estimating free energy differences that involve entropy changes and the hydrophobic effect. In this work, we systematically study the performance of the one-step perturbation method in the calculation of the free enthalpy difference between a polar water solute and a nonpolar “water” solute molecule solvated in a box of 999 polar water molecules. Both these polar and nonpolar physical reference states fail to predict the free enthalpy difference as obtained by thermodynamic integration, but the result is worse using the nonpolar physical reference state, because both a properly sized cavity and a favorable orientation of the polar solute in a polar environment are rarely, if ever, sampled in a simulation of the nonpolar solute in such an environment. Use of nonphysical soft-core reference states helps to sample properly sized cavities, and post-MD simulation rotational and translational sampling of the solute to be perturbed leads to much improved free enthalpy estimates from one-step perturbation. © 2012 Wiley Periodicals, Inc.