Binding-site water is often displaced upon ligand recognition, but is commonly neglected in structure-based ligand discovery. Inhomogeneous solvation theory (IST) has become popular for treating this effect, but it has not been tested in controlled experiments at atomic resolution. To do so, we turned to a grid-based version of this method, GIST, readily implemented in molecular docking. Whereas the term only improves docking modestly in retrospective ligand enrichment, it could be added without disrupting performance. We thus turned to prospective docking of large libraries to investigate GIST’s impact on ligand discovery, geometry, and water structure in a model cavity site well-suited to exploring these terms. Although top-ranked docked molecules with and without the GIST term often overlapped, many ligands were meaningfully prioritized or deprioritized; some of these were selected for testing. Experimentally, 13/14 molecules prioritized by GIST did bind, whereas none of the molecules that it deprioritized were observed to bind. Nine crystal complexes were determined. In six, the ligand geometry corresponded to that predicted by GIST, for one of these the pose without the GIST term was wrong, and three crystallographic poses differed from both predictions. Notably, in one structure, an ordered water molecule with a high GIST displacement penalty was observed to stay in place. Inclusion of this water-displacement term can substantially improve the hit rates and ligand geometries from docking screens, although the magnitude of its effects can be small and its impact in drug binding sites merits further controlled studies.