The applicability of cross-linked hydrogels in forming solid molecular dispersions to enhance the delivery of poorly soluble drugs has not been fully explored. The purpose of this study is to characterize physicochemical parameters affecting the formation of solid molecular dispersions of poorly water-soluble drugs in poly(2-hydroxyethyl methacrylate) (PHEMA) hydrogels and to investigate the effect of storage humidity levels on their physical stability. Samples were prepared by an equilibrium solvent loading process, using diclofenac sodium, piroxicam and naproxen as model drugs. These were characterized by X-ray diffraction (XRD), differential scanning calorimetry (DSC) and Fourier transform infrared spectroscopy (FTIR), as well as changes in the physical state during storage under different humidity conditions. The results show that a threshold drug loading level of about 30% exists in these solid molecular dispersions, above which amorphous to crystalline transition may occur. At any given drug loading, the onset of such change in physical state is accelerated at higher relative humidity levels during storage. The presence of hydrogen bonding between the polymer and the drug, as reflected in the observed FTIR band shifts, improves the compatibility between the drug and the polymer. This, together with a decreased mobility in the glassy polymer, helps to retard the crystallization event below the loading threshold. An increase in dissolution rate is also observed from the polymeric solid molecular dispersion as compared with that of the crystalline pure drug. These physicochemical results indicate that solid molecular dispersions based on PHEMA hydrogels can effectively enhance the dissolution and therefore should be potentially useful in improving the oral bioavailability of poorly water-soluble drugs.