We have carried out molecular dynamics studies of 1-octanol and its water-saturated solution using a slightly modified version of the OPLS (optimized intermolecular potential function for liquid simulations) model. The structural, dynamic, and energetic properties of these systems were studied via molecular dynamics simulations and compared with experiment where possible. The structure of the pure liquid and solutions are characterized in terms of fluctuating regions of preferentially polar and nonpolar character, including inverted micellar aggregates. Calculations of the dielectric constant and three dielectric relaxation times of l-octanol give reasonable agreement with experiment. The results of time-correlation analyses performed on MD trajectory data are appraised with respect to the various explanations proposed by experimentalists for the multiple-frequency dielectric responses observed in l-octanol. We propose a mechanism (involving the turnover of hydrogen-bonded aggregates) for the less well-understood low-frequency dielectric response. We have computed the relative partition coefficients of benzene and phenol in pure water versus hydrated 1-octanol in quantitative agreement with experiment. Here, by analyzing octanol/water solvation-shell structuring around the solutes, insight is gained into hydrated 1-octanol’s capability to serve as a biophase analog.