Dry and saturated red sandstone direct shear tests under different normal stresses were carried out in the rock shear test system to clarify the shear strength and damage characteristics. The cumulative ring count, cumulative energy, dominant frequency, secondary dominant frequency, and the effects of water saturation and normal stress on them were analyzed in detail. Results show that the cumulative ring count and cumulative energy curves of acoustic emission (AE) can be divided into linear increasing and step jump stages. The cumulative curves in the dry state have significant steps, thereby indicating that the repetitive process of “crack rapid development — energy accumulation” is significant. The cumulative ring count and cumulative energy are great when the normal stress is high. Under the same normal stress, the cumulative ring count and cumulative energy in the dry state are greater than those in the saturated state. The shear damage stresses were determined according to the cumulative curves. The failure process of red sandstone is divided into crack initiation and crack rapid development zones. The variation law of shear damage stress and shear strength of red sandstone is basically consistent. The growth rate of shear damage stress and strength of dry red sandstone is greater than that of saturated red sandstone with the increase in normal stress. The dominant and secondary dominant frequencies of dry and saturated red sandstone decrease with the increase in normal stress. The dominant frequency is less than the secondary frequency. Under the same normal stress, the dominant and secondary dominant frequencies of red sandstone shear failure in the dry state are less than those in the saturated state, thereby indicating that the shear microcrack scale of red sandstone in the saturated state is smaller than that in the dry state. The results have a certain theoretical significance to determine the shear damage degree of red sandstone by AE monitoring.