The answer is, it depends.
You should begin with the common sense fact that the more you drink the more likely you are to pee. So to reverse your question, not drinking water helps you to sleep better IF you are not sleeping well because you need to frequently get up and pee.
From the wikipedia article on Nocturia:
Nocturia (derived from Latin nox,
night, and Greek [τα] ούρα, urine),
also called nycturia (Greek
νυκτουρία), is the need to get up in
the night to urinate, thus
interrupting sleep. Its occurrence is
more frequent in pregnant women and in
the elderly. Nocturia could result
simply from too much liquid intake
before going to bed (usually the case
in the young), or it could be a
symptom of a larger problem, such as
sleep apnea, hyperparathyroidism,
chronic renal failure, urinary
incontinence, bladder infection,
interstitial cystitis, diabetes,
congestive heart failure, benign
prostatic hyperplasia, ureteral pelvic
junction obstruction or prostate
cancer.