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New ways to apply sustainable materials, such as biomass components, are essential for reducing dependence on fossil fuels. This work investigated the engineering properties of unsaturated expansive subgrade soils stabilized by bio-based energy coproducts containing lignin. Lignin is a waste by-product of the paper and pulp industry that is frequently burned. Highway subgrade could consume lignin as an environmentally benign, low-cost, and energy-efficient chemical substance for soil stabilization. Swell and shrink behavior of expansive subgrade soils complicates highway construction and causes damage to existing highways. However, research on the hydromechanical properties and volume change behavior of lignin-stabilized expansive soil is limited, and better insight is required into its unsaturated behavior for safe and economical pavement design practices. In this research, a series of geotechnical laboratory tests were conducted to characterize expansive subgrade soils treated with lignin by determining the Atterberg limits, compaction and consolidation behaviors, swelling characteristics, and water retention properties. The mechanisms influencing the changes in engineering properties of lignin-treated expansive soils were further investigated using soil pH, scanning electron microscopy, X-ray diffraction, and Fourier transform infrared spectroscopy analysis. The study shows that the optimal lignin content contributed to an acceptable degree of soil stabilization. The lignin-based cementing material effectively bonds soil particles together and fills pores, thereby preventing water infiltration into the soil and reducing the swell–shrink potential of stabilized soils. [ABSTRACT FROM AUTHOR]