Abstract The study aimed to investigate the impact of the osmotic effect on the drying and rehydration of paneer. The paneer slices were pre‐treated with salt at seven different concentrations and surface treatments. The osmotic solution and product ratio was taken as 1:4 and the pretreatment time was fixed as 12 h. Weight loss (WL), solute gain (SG), and weight reduction (WR) of paneer were evaluated during osmotic pretreatment. The pretreated paneer was dried at 50°C in a tray dryer. The equilibrium moisture content of dried slices varied from 14.12% to 15.86% and the moisture diffusivity of the osmotic treated samples had a better result with maximum value of 4.76 × 10 −8 m 2 /s. The osmotic pretreatment minimized the drying time of paneer. The Midilli model revealed the best fit for drying paneer slices with R 2 value >.99. Rehydration was carried out at three different temperatures at 4, 28, and 100°C. The samples rehydrated at 28°C showed better results in terms of the rehydration ratio with a maximal value of 1.85. In model investigation, the Peleg, Exponential, and Weibull model was found good fit for samples rehydrated at 4, 28, and 100°C. The osmotic pretreatment impacted positively on the quality matrices such as color retention, drying time, nutritional profile, and rehydration ratio of paneer slices. However, the higher osmotic pretreatments above 12% recorded unacceptable salty flavor. Practical applications The stability of paneer is limited and it requires refrigeration facility to store the paneer which is a frailty factor in supply chain cycle of dairy industries. In current practices, the high‐cost freeze drying technique was used to dry the paneer to make as shelf stable. The conventional drying techniques would not suit for drying the paneer, that alters the characteristics of paneer. The research findings will improve the characteristics of dried paneer in conventional dryer and hence, it is viable to make the shelf stable paneer at low cost. This research would make an alternative approach to manufacture the shelf stable and ready to eat paneer.