To ensure the aroma and flavour quality of dried herbs, it is essential to understand flavour reactions that occur during complex drying mechanisms. This study investigated aroma formation in dried Dendrobium nobile stems (Shihu), valued in Chinese cuisine and traditional medicine. Stems were dried in a convection oven over 48 h (70 °C). Carotenoids, amino acids, monosaccharides, and the resultant volatile compounds were quantified using HPLC-DAD, LC-MS/MS, HPAEC-PAD and GC–MS, respectively. β-ionone, 4-oxoisophorone and dihydroactinidiolide were formed through carotenoid degradation (supported by the concomitant loss of the precursor β-carotene). Safranal and β-damascenone were formed only through thermal drying. Methional and 3-methylbutanal were formed through Strecker degradation as part of the Maillard reaction, flavour precursors methionine and leucine, in addition to glucose, levels also reduced. This study provides quantified evidence revealing the mechanisms of flavour formation in Shihu during the drying process. This offers scientific strategies to enhance flavour quality of other comparable food ingredients.