Hydration dynamics plays a crucial role in determining the structure, function, dynamics, and stability of an enzyme. These dynamics involve the trapped-water motions within small distance along with the total protein dynamics. However, the exact molecular basis for the induction of enzyme function by water dynamics is still remain unclear. Here, we have studied both enzymatic activity and environmental dynamics at the active site of an enzyme, Subtilisin Carlsberg (SC), under confined environment of the reverse micelle (RM) retaining the structural integrity of the protein Kinetic measurements show, that enzymatic activity increases with increasing the water content of the RM. The picosecond-resolved fluorescence Stokes shift studies indicate faster hydration dynamics at the active site of the enzyme with increasing the water content in the RM (w(0) values). Temperature dependent hydration dynamics studies demonstrate the increased flexibility of the protein at higher temperature under confinement From temperature dependent solvation dynamics study, we have also calculated the activation energy that has to be overcome for full orientational freedom to the water molecules from bound to free state The results presented here establish a correlation between the enzymatic activity and dynamics of hydration of the encapsulated protein SC in cell-like confined environment within the structural integrity of the enzyme.