Atomistic molecular dynamics simulations of a fully hydrated liquid crystalline lamellar phase of a dimyrystoylphosphatidylcholine lipid bilayer containing ethanol at 1:1 composition as well as of the pure lamellar phase of the bilayer have been performed. Detailed analyses have been carried out to investigate the effects of ethanol, if any, on the lifetime dynamics of lipid-water and water-water hydrogen bonds in the hydration layer of the lipid headgroups. The nonexponential hydrogen bond lifetime correlation functions have been analyzed by using the formalism of Luzar and Chandler, which allowed the identification of the bound states at the bilayer interface and the quantification of the dynamic equilibrium between the bound and the free water molecules, in terms of time-dependent relaxation rates. The calculations show that the overall relaxation of phosphate-water hydrogen bonds is faster in the presence of ethanol. Studies of the residence time and the number fluctuation of the hydration layer water molecules reveal that the presence of ethanol molecules decreases the rigidity of the lipid hydration layer.