I have two lists - List1 and List2.  List1 has a lookup column referring to items in List2.

Once an item from List2 has been selected by an item in List1, I would like it to be hidden for all subsequent items in List1.

I am using Office 365 Sites, not Enterprise edition.

Thank you in advance!!

You can use JSLink to achieve this.  Using JavaScrpt, once the List2 dropdown is populated, you can use CSS or JS to hide the other fields.

Below is an example of how to get JSLink set up. 

http://www.learningsharepoint.com/2013/06/24/customize-fields-in-newform-aspx-hidedisablepre-populate-with-js-link-in-sharepoint-2013/