The abundance of pond ash and its resemblance to natural sand encourages its use as a substitute for sand in sand–bentonite (SB) liner material. Compaction water content influences the geoengineering properties of cohesive soil to a great extent. Accordingly, the compaction, strength, permeability and shrinkage characteristics of both pond ash–bentonite (PAB) and SB mixes are investigated at standard and modified Proctor compaction energies at various water contents to support the recommendation of the PAB mixture as an alternative landfill liner. At similar compaction conditions, the PAB mix exhibits higher unconfined compressive strength (UCS) and hydraulic conductivity than the SB mix. The UCS values of mixes compacted on the dry side of optimum are higher than those of mixes compacted on the wet side. Dry-side compacted mixes exhibit a reduction in hydraulic conductivity with permeation time, whereas no substantial reduction in hydraulic conductivity is noticed for wet-side compacted mixes. Furthermore, the volumetric shrinkage of both PAB and SB mixes is within the permissible value of 4%, for a wide range of water variation from the dry to the wet side of optimum. The observed mechanical properties are correlated to the shape of coarse fraction particles and the corresponding microstructural arrangements of the compacted specimens.