We report the first space-borne observation of dehydration in the Arctic polar stratosphere. In January 1997, the Improved Limb Atmospheric Spectrometer (ILAS) observed up to ~3 ppmv water vapor reduction during ice cloud formation and ~2 ppmv permanent removal of water vapor, mostly at altitudes between 23 and 26 km. In some cases, the dehydrated air was downwind from mountain wave induced Polar Stratospheric Cloud (PSC) events. Furthermore, simultaneous observations of HNO3 and H2O show that the gas phase reduction of HNO3 in the Arctic (January 1997) was much smaller than that observed in the Antarctic (June 1997) when a similar level of water vapor reduction occurred.