ABSTRACT This paper attempts to study the potential of lime on strength and bearing capacity improvement of subgrade soil. The effect of soil type, different lime percentages (3, 5, 7 and 9%) and curing duration (0, 7, 14 and 28 days) on the engineering properties of soil is evaluated by conducting series of laboratory tests such as linear shrinkage, unconfined compressive strength (UCS), split-tensile strength (STS) and California bearing ratio (CBR) test. The result indicates that soil with large clay fractions needs a relatively higher percentage of lime to alter their physicochemical characteristics. Addition of lime reduced the linear shrinkage strains and increased the UCS, STS and CBR value of soil. But beyond an optimum lime content opposite trend is observed. The strength improvement of lime stabilized soil is further enhanced with curing time. Moreover, the micro-structural analyses are performed to understand the mechanisms involved in the lime stabilization process. Change in soil morphology from FESEM (Field emission scanning electron microscope) and apparent formation of some new peaks in XRD (X-ray diffraction) and FTIR (Fourier transform infrared spectroscopy) analysis confirms the formation of cementitious compounds in lime stabilized soil. For particular lime content and curing duration, soil with high plasticity index gives lower strength value. Further, soil treated with 3% lime achieves 7 days target compressive strength value (i.e. 345 kPa). CBR values of soil treated with the optimum lime meet the requirement of subbase materials for low traffic rural roads thus reduce the overall pavement thickness and the construction cost.