In this study, specimens were prepared from Japanese cedar (Cryptomeria japonica) with different thicknesses to determine the best hot-pressing conditions for wood compression layered structural materials (WCLS) through densification at various temperatures and compressing time conditions. However, residual stress-releasing after densification recovery can cause dimensional instability. To address this issue, the drying set method was combined with the compression-set recovery test to determine the best setting time. As a result, the bending strength and modulus of rupture (MOR) of WCLS increased by 9.98 ± 9.71 to 20.87 ± 13.09% and the modulus of elasticity (MOE) increased by 9.87 ± 11.92 to 22.40 ± 17.97%. The volumetric swelling coefficient (S), water absorption percent (WAP), and equivalent moisture content (EMC) decreased as the drying time increased. The anti-swelling efficiency (ASE) and moisture excluding efficiency (MEE) were found to be the highest at a drying time of 12 h, with values ranging from 13.20 ± 15.11 to 36.46 ± 6.83% and 15.18 ± 1.11 to 19.58 ± 8.31%, respectively. The drying method was found to be effective in increasing dimensional stability. The glass transition temperature (Tg) moved to a lower temperature as the compression-set increased, which was due to plasticization of wood caused by high temperature and pressure. The cell walls of WCLS presented viscous buckling, which provided effective dimensional stability. The thermal conductivity of Japanese cedar and each compression-set WCLS were 0.1863 ± 0.0071, 0.1520 ± 0.0147, 0.1817 ± 0.0106, and 0.1423 ± 0.0137 W/mK, respectively. The thermal conductivity of each WCLS increased with an increase in compression-set, but decreased by 10.67 to 22.52% compared to Japanese cedar. The total electricity energy consumption of each WCLS after 24 h of testing decreased with a trend of 30.50 ± 0.84, 29.83 ± 0.42, 29.57 ± 0.51, and 29.4 ± 0.36 kWH.