Water dynamics in the hydration shell of the peripheral membrane protein annexin B12 were studied using MD simulations and Overhauser DNP-enhanced NMR. We show that retardation of water motions near phospholipid bilayers is extended by the presence of a membrane-bound protein, up to around 10 Å above that protein. Near the membrane surface, electrostatic interactions with the lipid head groups strongly slow down water dynamics, whereas protein-induced water retardation is weaker and dominates only at distances beyond 10 Å from the membrane surface. The results can be understood from a simple model based on additive contributions from the membrane and the protein to the activation free energy barriers of water diffusion next to the biomolecu...