After rapid progress over the past five years, organic-inorganic perovskite solar cells (PSCs) currently exhibit photoconversion efficiencies comparable to the best commercially available photovoltaic technologies. However, instabilities in the materials and devices, primarily due to reactions with water, have kept PSCs from entering the marketplace. Here, laser beam induced current imaging is used to investigate the spatial and temporal evolution of the quantum efficiency of perovskite solar cells under controlled humidity conditions. Several interesting mechanistic aspects are revealed as the degradation proceeds along a four-stage process. Three of the four stages can be reversed, while the fourth stage leads to irreversible decomposition of the photoactive perovskite material. A series of reactions in the PbI2-CH3NH3I-H2O system explains the interplay between the interactions with water and the overall stability. Understanding of the degradation mechanisms of PSCs on a microscopic level gives insight into improving the long-term stability.