Can drinking lots of water lower my blood sugar?

Drinking extra water will not dilute your blood sugar levels if you are already fully hydrated. However, being dehydrated can cause blood sugars to concentrate and subsequently rise. Dehydration can worsen diabetic ketoacidosis (DKA) and hyperosmolar hyperglycemic state (HHS). In general, it's a good idea to have at least 64 ounces of water daily, unless you are instructed to follow a fluid restriction from your doctor. This 64 ounce fluid recommendation can increase due to activity levels, time of year and personal preference.

Drinking water can lower blood sugar levels by diluting the amount of glucose (sugar) in the blood stream.

The answer is yes, indirectly it will reduce insulin resistance and help a person reduce their hunger.

Drinking 8 glasses of water a day appears to bring down one's blood sugars by reducing insulin resistance due to proper hydration. While at the same time the more water you drink the less hungry a person is so they tend to eat less during the day, similar to drinking a glass of water prior to eating fills the stomach causing a person who is dieting to reach satiation (fullness) sooner. 

If your blood sugars are very high and your kidney is not able to process all the sugar, water will help remove the excess sugar and ketones out of your system.

Drinking water is important for everyone but for diabetics, especially type 1 diabetics, it is crucial to remove excess ketones from the blood stream and reduce dehydration when blood sugars are high.