Etymology

dyke (n.)

"a lesbian," especially one considered tough, mannish, or aggressive, 1931, American English, perhaps a shortening of morphadike, a dialectal garbling of hermaphrodite; but bulldyker "engage in lesbian activities" is attested from 1921. According to "Dictionary of American Slang," a source from 1896 lists dyke as slang for "the vulva," and Farmer and Henley ("Slang and Its Analogues," 1893) has "hedge on the dyke" for "the female pubic hair." 

[T]he word appears first in the long forms, bulldiker and bulldyking, both used in the 1920s by American blacks. No African antecedents have been found for the term, however, which leads to the possibility that this is basically just another backcountry, barnyard word, perhaps a combination of BULL and DICK. [Rawson]

Definitions of dyke
1
dyke (n.)
(slang) offensive term for a lesbian who is noticeably masculine;
Synonyms: butch / dike
dyke (n.)
a barrier constructed to contain the flow of water or to keep out the sea;
Synonyms: dam / dike
2
dyke (v.)
enclose with a dike;
Synonyms: dike
From wordnet.princeton.edu