Adding limestone quarry dust to Type 1 Unbound Mixture (a standard material for road foundation applications in the UK) reduced its stiffness significantly. Application of PFA-APC residues binder (a blend of pulverised fuel ash and air pollution control residues), as a novel, zero-energy binder, could successfully stabilise the material and improve its mechanical properties. Compressive strength of the stabilised material has been an indication of its performance over time, illustrating achievement of high compressive strengths. This paper presents new findings on the microstructure of the PFA-APC residues binder to explain the mechanism of developing such high strength. X-ray diffraction (XRD) analysis, scanning electron microscopy (SEM) and energy dispersive X-ray spectroscopy (EDS) analysis revealed that the hardening is more due to formation of C-S-H gel, rather than the formation of crystalline hydrates. Also, it demonstrates share of each component in developing binding.