Our understanding of Solar System evolution is closely tied to interpretations of asteroid composition, particularly the M-class asteroids. These asteroids were initially thought to be the exposed cores of differentiated planetesimals, a hypothesis based on their spectral similarity to iron meteorites. However, recent astronomical observations have revealed hydration on their surface through the detection of 3-µm absorption features associated with OH and potentially H2O. We present evidence of hydration due mainly to OH on asteroid (16) Psyche, the largest M-class asteroid, using data from the James Webb Space Telescope (JWST) spanning 1.1-6.63 µm. Our observations include two detections of the full 3-µm feature associated with OH and H2O resembling those found in CY-, CH-, and CB-type carbonaceous chondrites, and no 6-µm feature uniquely associated with H2O across two observations. We observe 3-µm depths of between 4.3 and 6% across two observations, values consistent with hydrogen abundance estimates on other airless bodies of 250 - 400 ppm. We place an upper limit of 39 ppm on the water abundance from the standard deviation around the 6-μm feature region. The presence of hydrated minerals suggests a complex history for Psyche. Exogenous sources of OH-bearing minerals could come from hydrated impactors. Endogenous OH-bearing minerals would indicate a composition more similar to E-or P-class asteroids. If the hydration is endogenous, it supports the theory that Psyche originated beyond the snow line and later migrated to the outer main belt.