Caffeine can have a mild diuretic effect, but it does not significantly impact hydration levels in moderate consumption. Many studies suggest that moderate caffeine intake—such as from coffee or tea—does not lead to dehydration and is actually quite hydrating. However, excessive consumption may lead to increased urination and potential dehydration risks. Overall, while caffeine can influence fluid balance, it's important to consume adequate water and other fluids to maintain proper hydration alongside caffeine sources.