Melittin is a cationic hemolytic peptide composed of 26 amino acid residues. It is intrinsically fluorescent because of the presence of a single tryptophan residue which has been shown to be crucial for its hemolytic activity. We have previously shown that the sole tryptophan of melittin is located in a motionally restricted region in the membrane and the tryptophan environment is modulated in the presence of negatively charged phospholipids. Reverse micelles represent a type of organized molecular assembly which offer the unique advantage of monitoring dynamics of embedded molecules with varying degrees of hydration. We have employed reverse micelles as a membrane-mimetic system to monitor the effect of hydration on the organization and dynamics of melittin. Our results show that fluorescence parameters such as intensity, emission maximum, and polarization of melittin incorporated in reverse micelles of AOT in heptane are dependent on [Water]/[surfactant] molar ratio (w(0)) of the reverse micelle. Time-resolved fluorescence measurements of melittin in AOT reverse micelles show a gradual reduction in mean lifetime with increasing WO. More importantly, melittin. in reverse micellar environment showed red edge excitation shift (REES) implying that localization of the peptide in reverse micelles results in considerable restriction to the reorientational. motion of the solvent dipoles around the excited-state fluorophore. Interestingly, the extent of REES decreased with increasing w(0). Fluorescence polarization of melittin in reverse micellar environments was wavelength-dependent. In addition, increasing hydration causes significant increase in helicity of melittin bound to reverse micelles. Taken together, our results provide information about the dynamics of melittin in environments of graded hydration and are relevant to dynamics of membrane-bound peptides under conditions of differential hydration which are more difficult to analyze experimentally.