Hydraulic compactor is an efficient reinforcement machine for loess subgrade. However, it is difficult to control the layered compaction quality of the subgrade. This research presents a real-time layered compactness monitoring method for hydraulic compactor reinforcement of subgrade in loess areas. The hydraulic force coefficient is first introduced, and the dynamic response model of the hydraulic rammer and soil is established. The relationship between the acceleration of the hydraulic rammer and the compactness of subgrade is then obtained based on the collision theory in elastic half space. A full-scale test using a hydraulic compactor to reinforce loess subgrade was also carried out. Results show that the hydraulic compactor obtains the effective influence depth for the reinforcement of loess subgrade. Within the effective reinforcement depth, the relationship between the peak acceleration of the rammer and the layered compactness of subgrade can be well fitted by a quadratic function model. The layered compactness of the subgrade and the working state of the hydraulic compactor can then be remotely monitored at a mobile terminal in real time. Furthermore, the monitoring technology was applied to Huangling-Yan’an Expressway in China, significantly improving the accuracy and efficiency of real-time monitoring of the layered compactness of subgrade in the loess area.