Due to its reliability, strength, and ease of access, bamboo has become an attractive material for engineering applications. However, heterogeneous properties and durability issues still hinder the widespread use of bamboo as a building material. Thermo-mechanical treatment is a method to decrease the heterogeneity of bamboo culms and enhance mechanical properties and durability, but it may negatively impact dimensional stability. The objective of this study was to achieve the minimum spring back, water absorption, and thickness swelling for densified bamboo. Accordingly, the behavior of bamboo samples subjected to different thermo-mechanical (TM) treatments using a two-step analysis was investigated. In the first step, the optimum TM treatment for achieving the highest critical densification degree (DD) without shear failure was determined. In the second step, the three key elements of dimensional stability were studied for this optimum case. According to the first step results, the maximum achievable DD in which no shear failure happens and the texture is not disturbed is about 43.6%, and it can be obtained at 200 °C with a compression rate of 2 mm/min. X-ray densitometry analysis confirmed that DD of around 50% achieved the highest value of density, 1.30 g.cm−3. The results of step 2 revealed that the lowest values of spring back, water absorption, and thickness swelling, 4.72%, 23.80%, and 17.70% respectively, for densified bamboo occur when the densification process is conducted at 200 °C and adopting a compression rate of 6.7 mm/min. In conclusion, by manipulating and optimizing process parameters, the dimensional stability and final quality of densified bamboo can be improved, opening new opportunities for this class of material.