Vaginal itching and dryness is typically due to a yeast infection or dryness due to low estrogen levels in the vaginal area ? inside and out. Another possible condition that causes vaginal itching on the external area is something called Lichen Sclerosis, which is related to testosterone deficiency. An allergy to a soap or lubricant you are using is also possible. It is important that you bring this up to your doctor and that he or she evaluate it, in order to provide the proper treatment, as it will vary depending on the cause.