Understanding the influence of dehydration on the membrane structure is crucial to control membrane functionality related to domain formation and cell fusion under anhydrobiosis conditions. To this end, we perform all-atom molecular dynamic simulations of 1,2-dimyristoyl-sn-glycero-3-phosphocholine dimyristoylphosphatidylcholine lipid membranes at different hydration levels at 308 K. As dehydration increases, the lipid area per head group decreases with an increase in bilayer thickness and lipid order parameters indicating bilayer ordering. Concurrently, translational and rotational dynamics of interfacial water (IW) molecules near membranes slow down. On the onset of bilayer ordering, the IW molecules exhibit prominent features of dynamical heterogeneity evident from non-Gaussian parameters and one-dimensional van Hove correlation functions. At a fully hydrated state, diffusion constants (D) of the IW follow a scaling relation, D∼τα-1, where the α relaxation time (τα) is obtained from self-intermediate scattering functions. However, upon dehydration, the relation breaks and the D of the IW follows a power law behavior as D∼τα-0.57, showing the signature of glass dynamics. τα and hydrogen bond lifetime calculated from intermittent hydrogen bond auto-correlation functions undergo a similar crossover in association with bilayer ordering on dehydration. The bilayer ordering is accompanied with an increase in fraction of caged lipids spanned over the bilayer surface and a decrease in fraction of mobile lipids due to the non-diffusive dynamics. Our analyses reveal that the microscopic mechanism of lipid ordering by dehydration is governed by dynamical heterogeneity. The fundamental understanding from this study can be applied to complex bio-membranes to trap functionally relevant gel-like domains at room temperature. © 2021 Author(s).