In this study, we report on the synthesis and characterization of thermosets based on the renewable N,N′-octamethylene-bis(pyrrolidone-4-carboxylic acid) (BP-C8) and 1,3-bis(4,5-dihydro-2-oxazolyl)benzene (IAox). The BP-C8, having two pyrrolidone rings, is obtained via a bulk aza-Michael addition reaction of 1,8-diaminooctane with 2 equiv of itaconic acid using water as catalyst. Thermosets are prepared by mixing the desired ratio of BP-C8 with IAox, followed by thermal curing at 180 °C. The cross-link density of the thermosets is controlled by the usage of an excess of bis(2-oxazoline), and achievement of full conversion is confirmed by Fourier transform infrared spectroscopy. As anticipated, the glass transition temperature of the thermosets increases with increasing cross-linking density to values up to 100 °C. All thermosets are found to absorb water upon storage, resulting in a strong plasticizing effect and thus a suppression of the glass transition temperature. To assess the role of water on the thermo-mechanical properties, all thermosets are exposed to various relative humidities and their mechanical performance is evaluated. In general, we observe that the suppression in Tg under the influence of water facilitates a brittle-to-ductile transition as the Tg of the thermosets approaches room temperature. Additionally, in this study we demonstrate that hydrolysis of the ester bonds in the thermosets can be enforced at elevated temperatures in the presence of water, resulting in the liberation and migration of BP-C8 monomer. Interestingly, BP-C8 can readily be isolated by filtration as it crystallizes from water during cooling, thereby providing a promising route for its chemical recycling. Overall, these findings indicate that water plays a pivotal role in these poly(ester-amide)s as it functions as a catalyst in the BP-C8 synthesis, governs the thermal and mechanical properties of the thermosets, and opens up routes for chemical recycling of BP-C8 after hydrolysis as it acts as a recrystallization (co)solvent.