Ectoine is a widespread osmolyte enabling halophilic bacteria to withstand high osmotic stress that has many potential applications ranging from cosmetics to its use as a therapeutic agent. In this contribution, combining experiment and theory, the hydration and ion-binding of this zwitterionic compound was studied to gain information on the functioning of ectoine in particular and of osmolytes in general. Dielectric relaxation spectroscopy was used to determine the effective hydration number of ectoine and its effective dipole moment in aqueous solutions with and without added NaCl. The obtained experimental data were compared with structural results from 1D-RISM and 3D-RISM calculations. It was found that ectoine is strongly hydrated, even in the presence of high salt concentrations. Upon addition of NaCl, ions are bound to ectoine but the formed complexes are not very stable. Interestingly, this osmolyte strongly rises the static relative permittivity of its solutions, shielding thus effectively long-range Coulomb interactions among ions in ectoine-containing solutions. We believe that via this effect, which should be common to all zwitterionic osmolytes, ectoine protects against excessive ions within the cell in addition to its strong osmotic activity protecting against ions outside.