The compacted mudstone fragment, without adding any stabilizer is not suitable for fill material, because it does not possess good mechanical properties and volumetric stability. Mudstone fragment stabilized with lime has many beneficial effects: An increase in strength, an increase in bearing capacity, a reduction of swelling, a reduction of compressibility and a reduction of the moisture-sensitivity. Adding 3%~6% lime to mudstone is the economic and reasonable one to improve engineering properties and suitable for the subgrade materials. From the point of view of soil stabilization it is not necessary to add excess pozzolanic material for mudstone fragment.