Dehydration Reduces Resistance Exercise Performance:
"Even a change of as little as one per cent in body water can impair exercise performance and adversely affect recovery," warns Dr. Jeff Volek.  Assistant Professor in the Human Performance Laboratory at the University of Connecticut, Storrs.
A couple of issues back you may have read in the Research Update section a news brief that dehydration did not affect maximal strength but it reduced exercise performance.  In the study, subjects were exercised until they were mildly or moderately dehydrated.  After this period, they were fed but reframed from any liquids and allowed to go home and sleep.  They returned to the lab the next morning and weighed to make sure they were still within the dehydration parameters.  They then performed a series of power exercises: vertical jump height, peak lower-body power (assessed via jump squat), and isometric back squat.  Interesting, peak power in the vertical jump and jump squat were not affected.  In the second part of the study, the subjects were asked to perform six sets of 10 repetitions of back squats at 80% of a 1-RM.   The subjects that were mildly and moderately dehydrated had a decrease in the amount of reps they could crank out in the back squat when they were dehydrated.  

  
Dehydration Causes Increased Muscle Damage
Dehydration causes a rise in muscle temperature; increasing muscular temperature during exercise overload exercise sessions such as eccentric contractions impairs muscle function and induces greater damage skeletal muscle. One study demonstrated that downhill running produces muscle soreness but that dehydrated participants have more symptoms of muscle soreness than do well hydrated participants7. The researchers discovered that dehydration exacerbated the skeletal muscle damage to exercise causing greater muscle soreness. The bottom line is that if you are exercising hard and not drinking water, the effects of dehydration exacerbate the signs and symptoms of muscle damage. It gets much worse…Hydration status; a key determinant of exercise performance is also capable of modifying the response of many hormones during exercise.

Dehydration Increases Catabolic Hormones
    If gaining muscle is your goal, then you should care about cell volumization, or the hydration state of your muscle cells. In a well-hydrated muscle cell, protein synthesis is stimulated and protein breakdown is decreased. On the other hand, muscle-cell dehydration promotes protein breakdown and inhibits protein synthesis. Cell volume has also been shown to influence genetic expression, enzyme and hormone activity, and metabolic regulation.  Not having enough water sets up a disaster for muscle growth. Not being adequately hydrated leads to an exaggerated cortisol and adrenaline response to exercise.  For example, despite completing identical exercise protocols athletes that were dehydrated caused a significant decrease in the Testosterone: Cortisol ratio (a marker of anabolism). These results suggest that dehydration may increase the catabolic state of the body-mainly by increasing cortisol2.