If it peels off when wet, then it probaly is just wallpaper. Use a solution of DiF--a product for stripping wallpaper that dissolves the wallpaper glue--that you can get at Home Despot or other home centers. Drywall paper does not just peel off unless you tear into it.

It isn't drywall. I was at a house in Hemet, CA that had the same exact product. It is hung to the framing but no joint compound was evident between the panels. My curiosity lays with whether or not the material could have asbestos!

1. I am a huge fan of your site! DIY forever! I live in a city and am relaly excited to see what you do in NYC! Congrats and best wishes on the upcoming move!2.I rent so contact paper has been a GODSEND. I have used a faux leather black contact paper to redo my entire kitchen! I've covered my counter-top (which was stained, burned, severely damaged) and I also covered my fridge so it would match my decor! A tip I've picked up for applying it is using either a bowl scrapper (if you are a baker) or a credit card, and for removal a hair dryer is handy in warming the glue for clean removal!

I have this and want to know if it is safe to remove. It has fauz wood grain and no joint compound. It has been nailed to wood furring stips. The urring strips are nial to solid block walls and can be easily removed with a pry bar.

I found the same drywall with a wood grain printed finish where I live, Long Island NY. The house is 1950's and there is painted wood paneling over this faux wood drywall. I have read that you can not use joint compound on this style of drywall. Supposedly it was a quick and easy way to renovate unfinished areas such as the garage. I don't believe it was made to be an interior finished wall. I put the paneling back in place for now. My concern is safety. If the product had a short life on the market there must be a reason, unless it was just because it was ugly. I can't imagine why anyone would use this inside the home. I am in a true 4 level split level which was purchased from the original owner. No disclosures were made at closing because the son claimed he didn't know anything whatsoever, his father had the house built and the seller grew up here.
I am not in a rush to disturb anything in this house even though it needs repairs. This latest discovery of wood grain printed drywall has me wondering about asbestos. We will need to upgrade the electric as we discovered it is not up to code. I desperately need the info on that drywall.

If it was mine I would remove all the trim and go over the whole wall with 1/4 drywall.
Use Loc-Tite adhesive and you'll need less screws.
If you cut the drywall so it stays about 3/4 of the width of the casing back from the jambs the jambs will sit tight to the jamb.
http://www.loctiteproducts.com/p/12/4/pg_ca_all_p_clr/overview/Loctite-Power-Grab-All-Purpose-Clear-Construction-Adhesive-Cartridge.htm