Lipid oxidation (LO) is a recognised problem in dairy powders due to the formation of volatile odour compounds that can negatively impact sensory perception. Three commercial dairy powders, fat-filled whole milk powder (FFWMP), skim milk powder (SMP), and infant milk formula (IMF), stored under different conditions (21 °C, 37 °C, or 25 °C with 50% humidity), were evaluated by consumer acceptance studies, ranked descriptive sensory analysis, and LO volatile profiling using headspace solid phase microextraction gas chromatography mass spectrometry (HS-SPME GCMS) over 16 weeks. Significant (p = 0.001) differences in the concentration of LO compounds and sensory perception were evident between sample types in the different storage conditions. The sensory acceptance scores for FFWMP and SMP remained stable throughout storage in all conditions, despite the increased perception of some LO products. The IMF sample was perceived negatively in each storage condition and at each time point. Overall increases in hexanal, heptanal, and pentanal correlated with “painty”, “oxidised”, “cooked”, and “caramelised” attributes in all samples. The concentration of some LO volatiles in the IMF was far in excess of those in FFWMP and SMP. High levels of LO volatiles in IMF were presumably due to the addition of polyunsaturated fatty acids (PUFA) in the formulation.