The Crimson Tide trailed by as many as 16 points early in the second half, but fought back to within four as the game headed down the stretch.
Dillard, however, hit a 3-pointer with 7:04 to play that increased the Dayton lead to seven and he hit another one with 6:10 remaining to give the Flyers a 63-53 advantage. Alabama came no closer than eight points the rest of the way.
Dayton (6-3) ended a two-game skid, getting 20 points from Chris Johnson and 17 from Josh Parker. Dillard scored 14 to go with eight rebounds and six assists.
Alabama (7-2) was led by Tony Mitchell with 18. It was the second straight setback for the Crimson Tide, who fell to Georgetown last week after opening the season with seven straight wins.
Dayton hit 60 percent of its shots from the field and made 10-of-19 from 3-point range.