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Cracking and fragmentation problems that occur during lignite drying limit its utilization value. In this study, the dehydration, surface damage, and pulverization behaviors of lignite were investigated under hot-air drying conditions, and the effect of the dewatering process on shrinkage cracking was analyzed. Cracks first appear at the edges of the lignite, then gradually extend inward until they spread over the entire surface of the lignite, before beginning to shrink, and eventually stabilize. The crack rate exhibited three stages: rapid development, shrinkage, and stabilization. The crack rate and shrinkage percentage increased significantly with increase in the drying temperature. The moisture content had a greater influence on the crack rate and shrinkage percentage of the samples than the surface temperature. A uniaxial compression test revealed that lignite with different degrees of dryness exhibited different degrees of breakage. The drying process drives the lignite toward finer grain sizes and, with moisture content below 0.8 g/g, the degree of breakage increases significantly. Thus, the main factor affecting the shrinkage and cracking of lignite was the moisture content. Cracks occurred when the tensile strain caused by shrinkage was greater than the tensile strength of the lignite. [ABSTRACT FROM AUTHOR]