Hydrogen bonding in small water clusters is studied through computer simulation methods using a sophisticated, empirical model of interaction developed by Ricket al (S W Rick, S J Stuart and B J Berne 1994J. Chem. Phys.101 6141) and others. The model allows for the charges on the interacting sites to fluctuate as a function of time, depending on their local environment. The charge flow is driven by the difference in the electronegativity of the atoms within the water molecule, thus effectively mimicking the effects of polarization of the charge density. The potential model is thus transferable across all phases of water. Using this model, we have obtained the minimum energy structures of water clusters up to a size often. The cluster structures agree well with experimental data. In addition, we are able to distinctly identify the hydrogens that form hydrogen bonds based on their charges alone, a feature that is not possible in simulations using fixed charge models. We have also studied the structure of liquid water at ambient conditions using this fluctuating charge model.