Objective To analyze the effect of all-ceramic onlay restoration in the treatment of severe dental defect of posterior teeth. Methods A total of 70 patients with severe dental defect of posterior teeth admitted to our hospital from January 1, 2021 to June 30, 2022 were divided into the control group and the observation group by the random number table method, with 35 patients in each group. The control group received all-ceramic crown restoration, and the observation group received all-ceramic onlay restoration. The clinical effect, periodontal health, adverse reactions and treatment satisfaction were compared between the two groups. Results Compared with 82.86% of the total effective rate of treatment in the control group, the total effective rate of treatment in the observation group was higher, accounting for 97.14% (P <0.05). After treatment, the plaque index and gingival index in the two groups were lower than those before treatment, and those in the observation group were lower than those in the control group (P <0.05). Compared with 28.57% of the incidence of adverse reactions in the control group, the incidence of adverse reactions in the observation group was lower, accounting for 5.71% (P <0.05). Compared with 71.43% of the treatment satisfaction rate in the control group, the treatment satisfaction rate in the observation group was higher, accounting for 97.14% (P <0.05). Conclusion All-ceramic onlay restoration can improve the treatment effect for patients with severe dental defect of posterior teeth, enhance periodontal health, reduce the incidence of adverse reactions, and achieve higher patient satisfaction.