Railway ballast is a major structural component of railroad track that also facilitates the drainage of water. Particle breakage and abrasion due to dynamic loading and environmental impacts causes ballast to age and degrade. The finer materials generated from ballast degradation can adversely affect the track stability especially under wet conditions. This paper investigates through laboratory testing the effect of moisture on the behavior and performance of inservice ballast. The tested ballast samples were initially subjected to an artificial rain system as well as train loadings in the Facility for Accelerated Service Testing (FAST) at the Transportation Technology Center, Inc. (TTCI). The rainy test section experiment applied realistic dynamic freight train loads and continuously monitored the test sections to determine the effects of moisture and saturation conditions on the field performance trends of ballasted track. Accordingly, ballast samples at varying levels of degradation were collected from the test locations to investigate ballast gradations as well as strength and permeability characteristics at dry and wet conditions. Shear strength tests were performed using a large-scale triaxial test machine, known as the TX-24, to study ballast degradation effects on the strength of dry ballast. Materials finer than the 3/8 in. (9.5 mm) were then collected and studied for the moisture-density behavior using a modified Proctor type compactive effort. Shear strength samples with the same gradations and degradation levels were prepared and tested at varying moisture contents of the 3/8 in. (9.5 mm) fraction ranging from 3% to 9%, with the latter being the optimum moisture content of these finer materials. The wet ballast triaxial test samples had strength values only in the range of 38% to 65% of the dry strengths. In addition to the strength tests, constant head permeability tests were also conducted on the ballast samples which demonstrated quite low and negligible horizontal flow amounts through ballast under static pressure heads and at various hydraulic gradients.