The Collaborative International Dictionary of English v.0.48:

Dismay \Dis*may"\, v. t. [imp. & p. p. Dismayed; p. pr. & vb.
   n. Dismaying.] [OE. desmaien, dismaien, OF. esmaier; pref.
   es- (L. ex) + OHG. magan to be strong or able; akin to E.
   may. In English the pref. es- was changed to dis- (L. dis-).
   See May, v. i.]
   1. To disable with alarm or apprehensions; to depress the
      spirits or courage of; to deprive or firmness and energy
      through fear; to daunt; to appall; to terrify.
      [1913 Webster]

            Be not afraid, neither be thou dismayed. --Josh. i.
                                                  9.
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            What words be these? What fears do you dismay?
                                                  --Fairfax.
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   2. To render lifeless; to subdue; to disquiet. [Obs.]
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            Do not dismay yourself for this.      --Spenser.

   Syn: To terrify; fright; affright; frighten; appall; daunt;
        dishearthen; dispirit; discourage; deject; depress. --
        To Dismay, Daunt, Appall. Dismay denotes a state
        of deep and gloomy apprehension. To daunt supposes
        something more sudden and startling. To appall is the
        strongest term, implying a sense of terror which
        overwhelms the faculties.
        [1913 Webster]

              So flies a herd of beeves, that hear, dismayed,
              The lions roaring through the midnight shade.
                                                  --Pope.
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              Jove got such heroes as my sire, whose soul
              No fear could daunt, nor earth nor hell control.
                                                  --Pope.
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              Now the last ruin the whole host appalls;
              Now Greece has trembled in her wooden walls.
                                                  --Pope.
        [1913 Webster]

WordNet (r) 3.0 (2006):

dismaying
    adj 1: causing consternation; "appalling conditions" [syn:
           appalling, dismaying]

Moby Thesaurus II by Grady Ward, 1.0:

76 Moby Thesaurus words for "dismaying":
   affecting, afflictive, alarming, awing, baffling, bewildering,
   bitter, bleak, bothering, cheerless, chilling, comfortless,
   confounding, confusing, daunting, deplorable, depressing,
   depressive, deterrent, deterring, discomforting, discomposing,
   disconcerting, discouraging, disheartening, dismal, disquieting,
   distracting, distressful, distressing, disturbing, dolorific,
   dolorogenic, dolorous, dreary, embarrassing, enigmatic,
   fear-inspiring, fearful, fearsome, frightening, frightful,
   grievous, intricate, joyless, lamentable, mournful, moving,
   mysterious, mystifying, overawing, painful, pathetic, perplexing,
   perturbing, piteous, pitiable, poignant, problematic, puzzling,
   regrettable, rueful, sad, saddening, scaring, scary, sharp, sore,
   sorrowful, startling, touching, uncomfortable, upsetting,
   woebegone, woeful, wretched