This study developed functional beef tallow with reduced saturation, improved flavor, and enhanced storage stability through optimized dry fractionation (44 °C, 8 h, 6 °C/h) and micro-oxidation (150 °C, 40 min, 130 L/h). Fractionation increased unsaturated fatty acids (UFA) by 7.60 ± 0.09%, with oleic acid increasing by 5.37 ± 0.64%, which can be attributed to its lower melting point, leading to preferential distribution in the liquid phase during crystallization. Micro-oxidation generated 49 volatile compounds (VOCs), predominantly aldehydes (∼80%), which drive the pleasant flavor of tallow. Storage trials indicated that the fractionated flavor-enhanced tallow (FFET) provided optimal stability under sealed, light-protected conditions at 4 °C, with oxidation trends comparable to refined tallow (RT). These findings offer a technical framework for developing functional tallow with applications in food processing and flavor enhancement.