The structure and thermal behavior of hydrated and lyophilized dipalmitoylphosphatidylcholine (DPPC) multilayers in the presence of trehalose were investigated by differential scanning calorimetry and X-ray diffraction methods. Trehalose enters the aqueous space between hydrated bilayers and increases the interbilayer separation (from 0.36 to 1.37 nm in the different DPPC phases at 1 M trehalose). It does not affect the lipid chain packing and also the slow isothermal conversion at 4 °C of the metastable Lβ′ phase into the equilibrium crystalline Lc phase. Addition of trehalose leads to a slight upward shift (about 1 °C at 1 M trehalose) of the three phase transitions (sub-, pre-, and main transition) in fully hydrated DPPC while their other properties (enthalpy, excess specific heat, and transition width) remain unchanged. The effect of trehalose on the thermal behavior of DPPC multilayers freeze-dried from an initially completely hydrated state is qualitatively similar to that of water. These data support the “water replacement” hypothesis about trehalose action. It is suggested that trehalose prevents the formation of direct interbilayer hydrogen bonds in states of low hydration.