Understory planting affects the growth environment of tea plants, regulating the tea plant growth and the formation of secondary metabolites, which in turn affects the flavor of Xiaobai white tea. The present research adopted biochemical composition determination, widely targeted volatilities (WTV) analysis, multivariate statistical analysis, and odor activity value (OAV) analysis to analyze the characteristics in the macro-composition and volatile compounds of understory white tea. The sensory evaluation results indicated that understory Xiaobai white tea (LWTs) was stronger than ordinary Xiaobai white tea (PWTs) in terms of the taste of smoothness, sweetness, and thickness as well as the aromas of the flower and sweet. Understory planting reduced light intensity and air temperature, increased air humidity, organic matter, total nitrogen, and available nitrogen contents, which improved the growth environment of tea plants. The phytochemical analysis showed that the water-extractable substances, caffeine, flavonoids, and soluble sugar contents of understory tea fresh-leaf (LF) were higher than those of ordinary fresh-leaf (PF). The phytochemical analysis showed that the free amino acids, theaflavins, thearubigins, water-extractable substances, and tea polyphenols contents of LWTs were significantly higher than those of PWTs, which may explain the higher smoothness, sweetness, and thickness scores of LWTs than those of PWTs. The 2-heptanol, 2-decane, damasone, and cedar alcohol contents were significantly higher in LWTs than in PWTs, which may result in stronger flowery and sweet aromas in LWTs than in PWTs. These results provide a firm experimental basis for the observed differences in the flavor of LWTs and PWTs.