We studied the dynamics of the wetting and diffusing processes of water droplets on hydrogel (Poly(2-acrylamido-2-methyl-propane-sulfonic acid-co-acrylamide) (PAMPS-PAAM)) substrates. The profiles of the droplet and substrate were measured simultaneously using a grid projection method. We observed that as the water droplet diffuses into the gel, the contact line of the droplet exhibits successively two different behaviors: pinned and receding, and the transition between these two behaviors is closely related to the local deformation of the gel substrate. The contact line is pinned at an early stage. As the water diffusion proceeds, the contact angle of the droplet decreases while the angle of the local slope of the gel surface near the contact line increases. At the moment where these two angles almost correspond to each other, the contact line starts to recede. Our results indicate that due to the water diffusion, a locally swollen region is formed in the vicinity of the droplet-gel interface, and whether the contact line is pinned or recedes is determined by the surface property of this swollen region.