Fiber saturation point (FSP) is an important concept in wood–moisture relations that differentiates between the states of water in wood; the concept has been discussed in the literature for more than 100 years. Despite its importance and extensive study, the exact theoretical definition of FSP and the operational definition (the correct way to measure FSP) are still debated because different methods give a wide range of values. Forest Service researchers developed a theoretical definition of FSP based on solution thermodynamics that treats FSP as a phase boundary. This thermodynamic interpretation allows FSP to be calculated from the chemical potentials of bound and free water as a function of moisture content, assuming they are both known. Treating FSP as a phase boundary naturally lends itself to the construction of a phase diagram of water in wood. The researchers conducted a preliminary phase diagram with previously published data, and the phase diagram was extended to a state diagram by adding data on the glass transition temperatures of the wood components. This thermodynamic interpretation and resulting state diagram represent a potential framework for understanding how wood modification may affect wood–moisture relations.