Functional soft materials that swell in water often exhibit surface wrinkling, similar to the ridges formed on human skin after prolonged immersion, typically leading to reduced optical transmittance. Surprisingly, there is a scarcity of materials that are transparent underwater yet opaque in air, despite their vast potential in applications such as smart windows, periscopes, and information encryption. Herein, we report a hydrogel-based system comprising a polyacrylamide layer on polydimethylsiloxane (PDMS), demonstrating a reversible transition between opacity in air and high transparency in water or wet conditions. Upon water-induced swelling, the transmittance of the hydrogel layer markedly increases from 7.8% in air to 77.1% with excellent repeatability. This behavior enables applications such as optical encryption and decryption and water writing. Micro- and nanostructural analysis reveals that the optical switching arises from the reduction in local surface roughness upon hydrogel swelling. Furthermore, when employed as a smart window, the hydrogel layer effectively reduces solar power transmission by 36%, achieving a temperature reduction of 5.09 °C under direct sunlight while retaining heat in the absence of sunlight. These findings highlight the hydrogel layer on PDMS as a versatile platform for water-responsive smart devices, offering exciting opportunities in optical encryption, interactive writing systems, and energy-efficient window technologies.