Green rooibos extract (GRE), shown to improve hyperglycemia and HDL/LDL blood cholesterol, has potential as a nutraceutical beverage ingredient. The main bioactive compound of the extract is aspalathin, a C-glucosyl dihydrochalcone. The study aimed to determine the effect of common iced tea ingredients (citric acid, ascorbic acid, and xylitol) on the stability of GRE, microencapsulated with inulin for production of a powdered beverage. The stability of the powder mixtures stored in semi-permeable (5 months) and impermeable (12 months) single-serve packaging at 30 °C and 40 °C/65% relative humidity was assessed. More pronounced clumping and darkening of the powders, in combination with higher first order reaction rate constants for dihydrochalcone degradation, indicated the negative effect of higher storage temperature and an increase in moisture content when stored in the semi-permeable packaging. These changes were further increased by the addition of crystalline ingredients, especially citric acid monohydrate. The sensory profile of the powders (reconstituted to beverage strength iced tea solutions) changed with storage from a predominant green-vegetal aroma to a fruity-sweet aroma, especially when stored at 40 °C/65% RH in the semi-permeable packaging. The change in the sensory profile of the powder mixtures could be attributed to a decrease in volatile compounds such as 2-hexenal, (Z)-2-heptenal, (E)-2-octenal, (E)-2-nonenal, (E,Z)-2,6-nonadienal and (E)-2-decenal associated with “green-like” aromas, rather than an increase in fruity and sweet aroma-impact compounds. Green rooibos extract powders would require storage at temperatures ≤ 30 °C and protection against moisture uptake to be chemically and physically shelf-stable and maintain their sensory profiles.