Figure (a) shows a head-on view of an airplane that has dihedral where the wings are turned up at some dihedral angle to the horizontal. If a disturbance causes one wing to drop relative to the other (figure (b)), the lift vector rotates and there is a component of the weight acting inward which causes the airplane to move sideways in this direction. When wings have dihedral, the wing toward the free-stream velocity, hence the lower wing, will experience a greater angle of attack than the raised wing and hence greater lift. There results a net force and moment tending to reduce the bank angle (figure (c)).

Credits - NASA