Modulating the structures and properties of biomembranes via permeation of small amphiphilic molecules is immensely important, having diverse applications in cell biology, biotechnology, and pharmaceuticals, because their physiochemical and biological interactions lead to new pathways for transdermal drug delivery and administration. In this work, we have elucidated the role of dimethyl sulfoxide (DMSO), broadly used as a penetration-enhancing agent and cryoprotective agent on model lipid membranes, using a combination of fluorescence microscopy and time-resolved fluorescence spectroscopy. Spatially resolved fluorescence lifetime imaging microscopy (FLIM) has been employed to unravel how the fluidity of the DMSO-induced bilayer regulates the structural alteration of the vesicles. Moreover, we have also shown that the dehydration effect of DMSO leads to weakening of the hydrogen bond between lipid headgroups and water molecules and results in faster solvation dynamics as demonstrated by femtosecond time-resolved fluorescence spectroscopy. It has been gleaned that the water dynamics becomes faster because bilayer rigidity decreases in the presence of DMSO, which is also supported by time-resolved rotational anisotropy measurements. The enhanced diffusivity and increased membrane fluidity in the presence of DMSO are further ratified at the single-molecule level through fluorescence correlation spectroscopy (FCS) measurements. Our results indicate that while the presence of DMSO significantly affects the 1,2-dimyristoyl-rac-glycero-3-phosphocholine (DMPC) and 1,2-dipalmitoyl-rac-glycero-3-phosphatidylcholine (DPPC) bilayers, it has a weak effect on 1,2-dimyristoyl-sn-glycero-3-phospho-rac-glycerol (DMPG) vesicles, which might explain the preferential interaction of DMSO with the positively charged choline group present in DMPC and DPPC vesicles. The experimental findings have also been further verified with molecular dynamics simulation studies. Moreover, it has been observed that DMSO is likely to have a differential effect on heterogeneous bilayer membranes depending on the structure and composition of their headgroups. Our results illuminate the importance of probing the lipid structure and composition of cellular membranes in determining the effects of cryoprotective agents. © 2021 American Chemical Society.