To supply their booming blended whisky, Tommy Dewar and "Little Red" John Dewar established Aberfeldy Distillery a quarter mile east of Aberfeldy village. They chose the site of the former Guardbridge distillery, which had also operated under that name from 1825 to 1867. John Dewar, father of the distillery's founders, was born in a cottage two miles from the distillery. The new distillery opened in 1898 and was built according to "the most modern principles": malt entered at one end of the distillery and whisky emerged from the other, and the distillery even had a private railway line connecting to Dewar's blending center in Perth, bringing in grain and coal and carrying away barrels of whisky. This line closed in the 1960s, and only an old "saddle-tank" shunting locomotive named "Puggie" (Scots for "monkey") remains as a link to the distillery. In 1925, Dewar's Whisky, along with Aberfeldy Distillery, joined D.C.L., subsequently operated by S.M.D. After the government relaxed building regulations in 1960, S.M.D. replaced the distillery's original two stills on a one-to-one basis and switched to mechanical coal heating. Between 1972 and 1973, the distillery rebuilt the stillhouse and mash house using the original old stone; there are now four indirectly heated stills. In 1998, after D.C.L.'s successor U.D. merged with Grand Metropolitan to form U.D.V. (later Diageo), it had to divest some spirits brands. The "Dewar's" brand and four distilleries, including Aberfeldy, were acquired by Bacardi. Since then, Bacardi has invested over £3 million in upgrading Aberfeldy Distillery, including establishing a first-class visitor center—"Dewar's World of Whisky." The distillery makes full use of the company's extensive archives to promote the legendary story of the Dewar brothers and the brand's world fame. Dewar's has consistently been the number one whisky brand in the US market. The visitor center opened in 2000 and receives approximately 35,000 visitors annually.

Aberfeldy Distillery is situated on land that was once the feudal estate of the Marquess of Breadalbane, who retained the mineral rights for gold mining. In 2007, these rights were acquired by Alba Mineral Resources, which is currently investigating potential gold reserves across 322.4 square kilometers surrounding Loch Tay. In 1902, A.J. Cameron, the Master Blender for Dewar's, pioneered the innovative practice of returning blended whisky to oak casks for an additional three to six months of maturation. His successor, Stephanie Macleod, has applied Cameron's method to the maturation of both Aberfeldy Single Malt and Dewar's Blended Whisky. (Dewar's blended whisky continues to mature for two years post-blending.) In 2007, Bacardi purchased land at Poneil near Pitlochry, investing £120 million to construct nine new maturation warehouses, with nine additional warehouses planned.