To improve the problem of collapsibility of loess, adding industrial materials such as cement is common engineering treatment, but this seriously damages the reclamation performance of soil. Calcium lignosulfonate (CLS) from paper plant waste fluids is a natural bio-based polymer with good application prospects as a soil improver. In this paper, the collapsibility and mechanical properties of CLS improved loess were investigated using a collapsibility test, gray correlation analysis, and an unconfined compressive strength test (UCS). In addition, the strengthening mechanism of CLS-improved loess was also explored based on scanning electron microscopy (SEM), microstructure parameters, and X-ray diffraction. The collapsibility coefficient decreased rapidly after CLS was admixed, and the single and double-oedometer methods showed the same change trend. The order of grey correlation degree of collapsibility on each index from large to small was: moisture content, pore ratio, dry density, and CLS content. The dosage of CLS greatly influenced the mechanical properties and collapsibility of stabilized loess. The optimum amount of CLS for Xi’an loess was 3%, at which the collapsibility coefficient was reduced by more than 95%, and the 28 d UCS increased by 180.01%. From the microstructure and mineral composition analysis perspective, CLS plays a role in filling pores and linking soil particles. After the protonation and ion exchange effect of CLS, the grain size and double electric layer thickness of mineral composition were reduced, and the structural compactness was increased. These research results are of great scientific significance for the ecological modification of soils.