A simple, efficient and economical solvent-free solid-phase oxalic acid (OA) leaching process was employed to treat natural red palygorskite-rich clay (Pal-R-C). The effect of OA leaching parameters (e.g., dosage of OA, reaction temperature and reaction time) on the color and physicochemical properties of Pal-R-C was studied, and the application potential of the acid-activated Pal-R-C in polymer composite was studied by evaluating its reinforcing role on sodium alginate (SA) film. The results indicate that the solid-phase OA leaching reaction may dissolve red hematite and other acid-soluble impurities. Mössbauer spectra analysis confirmed that the red color of clay is mainly resulting from the hematite impurity existed in the mixed clay, instead of octahedral iron ions, and the removal of hematite caused the color change of clay from red to white. The increase of OA dosage made more iron oxide being leached, leading to the further increase of the whiteness of product. The reaction process occurred at melting state of OA is relatively static, and could be easily controlled by tuning the reaction conditions. After treatment with 60% of OA, the total iron content of Pal-R-C decreased by 69%, and the color of Pal-R-C was transformed completely from red to white, as confirmed by the change of L* value from 64.4 to 84.4, a* value from 13.9 to 0.4, and b* value from 24.7 to 5.2. SEM and TEM results indicate the OA leaching process does not obviously damage the crystalline structure and morphology of Pal rod and other minerals. The specific surface area increased from 40.27 to 62.79 m2/g after the OA leaching process. The whitened Pal-R-C can improve the tensile strength of polymer films more effectively than raw Pal-R-C. This paper would pave a foundation for extending the large-scale applications of natural abundant red clay resource.