The mechanism that leads to fine particle production during pulse combustion drying is still unclear. Although droplet breakup could happen, it cannot result in particles below micron-size. Here production of fine particles during pulse combustion drying is investigated experimentally and numerically. Experiments with three different materials, namely SiO2, TiO2, and maltodextrin, have been conducted to see how the material types and process conditions influence the physical properties of the products. The results show that fine particles can be obtained with and without pulsation, and no significant differences are observed with the variation of pulsation frequency. The volume fraction of the fine particles is, however, very low. Based on these results, a model of particle production through repetitive crust breakage and drying cycles is proposed. The obtained results are in agreement with the experimental data, and the proposed mechanism could explain the production of fine particles with and without gas pulsation.