Dehydration of hydrates of pharmaceutical inactive/active ingredients (pharmaceutical hydrates) may easily occur during storage or manufacturing. Loss of water may have little effect on the crystal lattice, produce less hydrated forms or possibly amorphous form. Characterizing the effects of water loss on crystal hydrate forms is important for understanding the behavior of hydrates throughout the manufacturing and storage processes. This study shows that exposure of the monohydrate form of Lactose to gentle heating (145°C) results in the loss of 1 mole of bound water. Upon removal of the bound water, the crystal lattice adjusts producing a distinct phase characterized by powder X-ray diffraction, thermal, IR, BET specific surface area, and PSD data. Adjustment of the crystal lattice appears to compromise crystal integrity and can result in reduced crystallite, particle sizes and increase in surface area. The evidences of adjustment in crystal integrity and water movement from particle also showed using hot stage microscopy (HSM).