Introduction Hand hygiene is crucial for preventing healthcare-associated infections in dental settings. Despite its importance, the hand hygiene compliance rates remain unclear, particularly in dental university hospitals where teaching, research, and clinical practice intersect. This study aimed to establish a baseline of hand hygiene compliance rates in a dental university hospital, evaluate the effectiveness of direct observation in improving compliance, and compare practices among different categories of healthcare workers. Materials and methods This retrospective cohort study was conducted at Kanagawa Dental University Hospital from April 2022 to March 2023. The design included four blinded direct observations to establish baseline compliance rates, followed by educational training and four unannounced explicit observations. Compliance was assessed based on the World Health Organization's "Your 5 Moments for Hand Hygiene: Dental Care," adapted for dental outpatient services. The study focused on hand hygiene using alcohol-based hand sanitizers, and compliance rates were calculated for dentists, dental hygienists, dental assistants, and trainee dentists. Monthly consumption of hand sanitizer per patient was tracked from January 2019 as a secondary measure. Statistical analysis included Fisher's exact test, unpaired t-tests, and analysis of variance (ANOVA). Results The baseline hand hygiene compliance rate was low at 15.6%, with the highest compliance (25.0%) for "After touching patient surroundings." Post-intervention, the overall compliance rate increased significantly to 36.0% (p < 0.001). Significant improvements were observed in moments "After body fluid exposure risk" (11.1% to 31.3%, p = 0.004), "After touching a patient" (12.0% to 52.9%, p = 0.006), and "After touching patient surroundings" (25.0% to 73.3%, p = 0.001). Dental hygienists, assistants, and trainee dentists showed significant increases in hand hygiene compliance, while dentists did not. Hand sanitizer consumption increased significantly from 2019 (2.38 ± 0.29 mL per patient) to 2020 (3.47 ± 0.49 mL, p < 0.001) and remained elevated through 2023. Conclusions This study revealed low baseline hand hygiene compliance in a dental university hospital setting. While direct observation and education led to significant short-term improvements, especially among allied health professionals, the disconnect between observed compliance rates and hand sanitizer consumption suggests these changes may not represent sustainable behavioral shifts. The varying improvement rates among different healthcare workers and the challenges in maintaining long-term adherence highlight the need for tailored, continuous interventions in dental education and practice settings to enhance hand hygiene compliance.