This paper presents a demand dispatch strategy of aggregated electric water heaters (EWHs) for a load aggregation system at demand side, based on the theory of cyber-physical system. The objective is to solve the problem of water heater load control when the cyber-physical load aggregation system participates in demand dispatch of the power grid. First, an implementation framework of the demand dispatch strategy is designed between the cyber space and the physical space, including state awareness, real-time analysis, scientific decision-making and precise execution. Second, a multilevel incentive model, an EWH appliance model and a thermostat setpoint control rule are introduced. Next, based on the models and the rule, the state awareness logic, real-time analysis logic, scientific decision-making logic and precise execution logic of the strategy are designed to implement demand dispatch of aggregated EWHs. Finally, simulation results confirm the effectiveness, the advantage and excellent scalability of the proposed strategy.