The Blues meanwhile have a poor recent record in derbies, winning only one of their last 11 matches against the three other Welsh regions, and while Lydiate has plenty of friends in the Blues' rank those ties will be on hold for 80 no holds barred minutes.
He said: "A lot of internationals will be playing for the Blues in this game so it will be a massive challenge for us as a team, but it's one of those things where you want to play against a good team in order to better your team.
"We are here at home and I am sure the Blues will be as up for the game as we are.
"There's no one in particular that I am looking forward to playing against just looking forward to getting back on the pitch, this should be a really good test.
"It was a disappointing result by the boys from the Leinster game although it was good to see the boys scoring tries against the Leinster side.
"We are looking for a lot better effort in defence when we play the Blues at home, it's always going to be a tough game but it's also an exciting game because it's a derby match. I am really looking forward to it"
"It's a massive challenge for us to be playing against the Blues, we will be playing against my teammates who play for Wales, which should be an exciting game and with it being a derby match they are usually quite eventful.
"So hopefully a lot of our fans will turn up and support us for what could be a really good game of rugby."
Lydiate is one of two changes made by Dragons coach Darren Edwards with captain Lewis Evans also coming in to fill the openside berth.
Phil Davies meanwhile makes six changes from the side that were denied victory by a late Greig Laidlaw drop goal at the Arms Park against Edinburgh.
Four of them come in the backs with youngsters Thomas Williams and Rhys Patchell getting their first league starts at full-back and fly-half respectively while wing Harry Robinson and scrum-half Lloyd Williams completing a young backline.
In the forwards, hooker Marc Breeze replaces Rhys Williams while Benoit Bourrust loses his place to prop Nathan Trevett and Blues director of rugby Phil Davies is under no illusions as to the scale of the task awaiting his side.
"We have had a good couple of days preparation making sure we continue to improve in all areas of the game," he said.
"We are trying to remain objective across the board and if we have learnt anything from last Friday it would be that we have to be more clinical when we get the line breaks and we have to finish off our scoring opportunities.
"Rodney Parade is a great place to go and play. It has retained its atmosphere from years ago.
"I am sure it will be good, we will have a lot of shouting and excitement down there and we are looking forward to it.
"The Dragons had a great win against the Zebres and then they went to Leinster, where even though they were defeated they played some good rugby.
"Any team that has Lydiate and Faletau playing for them, are going to be a threat.
"They are a good side all round, they have a strong front five and good half backs, they have some good pace on the wing, they are a well balanced team. They are going to be tough components for us."
At Rodney Parade, 6.30pm.
Referee: Neil Hennessy (WRU, 10th competition game)
Assistant Referees: James Jones, Wayne Davies (both WRU)
Citing Commissioner: John Charles (WRU)
TMO: Gareth Simmonds (WRU)
Live on S4C