Abstract Tardigrades, also known as water bears, make up a phylum of small but extremely hardy animals, renowned for their ability to survive extreme stresses, including desiccation. How tardigrades survive desiccation is one of the enduring mysteries of animal physiology. Here we show that CAHS D, an intrinsically disordered protein belonging to a unique family of proteins possessed only by tardigrades, undergoes a liquid-to-gel phase transition in a concentration dependent manner. Unlike other gelling proteins, such as gelatin, our data support a mechanism in which gel formation of CAHS D is driven by intermolecular β-β interactions. We find that gel formation corresponds with strong coordination of water and slowing of water diffusion. The degree of water coordination correlates with the ability of CAHS D to protect lactate dehydrogenase from unfolding when dried. This implies that the mechanism for unfolding protection can be attributed to a combination of hydration and slowed molecular motion. Conversely, rapid diffusion leading to efficient molecular shielding appears to be the predominant mechanism preventing protein aggregation. Our study demonstrates that distinct mechanisms are required for holistic protection during desiccation, and that protectants, such as CAHS D, can act as molecular ‘Swiss Army Knives’ capable of providing protection through several different mechanisms simultaneously.