David Croft, 54, and another man were in the dinghy when it capsized near the island of Sanday at about 7.30pm on Sunday.
Both men managed to reach the shore and called emergency services.
A Coastguard helicopter was sent to the scene and airlifted Mr Croft to Balfour Hospital in Orkney, where he later died.
The other man was flown to Gilbert Bain Hospital in Shetland, where he was said to be in a stable condition.
Police said Mr Croft was from the Howe area of the island.
Officers are continuing to investigate the circumstances and urged any witnesses to contact them on 101.
• READ MORE: Man dies in dinghy accident off Orkney
The death is the latest in a series of tragedies around Britain’s coastline this summer.
Last week, a 17-year-old boy died in a dinghy accident in Sunderland.
Liam Hall was pulled from the water at the mouth of the River Wear after getting into difficulty while out in a dinghy with three friends.
Two families were swept out to sea at opposite ends of the country last month, prompting coastguard warnings.
On August 19, Rudy Bruynius, his wife Lisinda and their two-year-old daughter Mckayla were swept out to sea by a large wave at Fistral Beach in Cornwall - while Julie Walker, 37, and her son Lucas, six, from Aberdeen, died a day later after getting into difficulties in the water off the city’s beach.
On Camber Sands on August 24 - the hottest day of the year so far - five young people died and just days later a man died while scuba diving with his partner’s 12-year-old daughter near St Austell, Cornwall.