Wellbore instability due to shale hydration and dispersion is always a challenge in oil and gas drilling engineering. Hydroxyl-terminated polyamidoamine (PAMAM-OH) dendrimers were probed as potential shale inhibitors for the first time. The inhibitive potential of candidate PAMAM-OH dendrimers was screened with particle size distribution test, bentonite inhibition test, and cuttings dispersion test. In order to reveal the underlying inhibitive mechanism, the interaction between the dendrimers and sodium bentonite (Na-Bent) was characterized using X-ray diffraction analysis, zeta potential measurement, and thermal gravimetric analysis. The results indicated that PAMAM-OH dendrimers could intercalate into bentonite particles. The intercalation can form in mono or bilayer arrangement. The deformation of bentonite increased with the intercalated number of layers and affected by the phase variety and the change in adsorbed concentration. When adopting monolayer adsorption in the interlayer, the dendrimers exhibited effective inhibition performance, while the bilayer adsorption corresponded to decreased inhibitive performance. Marked improvement in shale inhibition was realized when a routinely used shale inhibitor KCl and PAMAM-OH were combined. A stable monolayer intercalation of dendrimers was observed in the presence of KCl, suggesting a synergetic effect between PAMAM-OH dendrimers and KCl.