Expansive soil exhibits significant swellings and shrinkages, which may result in severe damage or the collapse of structures built upon it. Calcium-based admixtures, such as lime, are commonly used to improve this problematic soil. However, traditional chemical additions can increase significant environmental stress. This paper proposes a sustainable solution, namely, the use of lignin fiber (LF) from the paper industry to partially replace lime as an amendment for expansive soils. Both the macroscopic and microscopic characteristics of the lignin fiber-treated expansive soil are extensively studied. The results show that the mechanical properties of expansive soil are improved by using lignin fiber alone. Under the condition of an optimal dosage of 8%, the compressive strength of lignin fiber-modified soil can reach 193 kPa, the shear strength is increased by 40% compared with the untreated soil, and the water conductivity is also improved with the increase in dosage. In addition, compared with 2% lime-modified soil, the compressive strength of 8% lignin fiber- and 2% lime composite-treated expansive soil increased by 50%, the cohesion increased by 12%, and the water conductivity decreased significantly. The microstructure analysis shows that at an 8% lignin fiber content, lignin fibers interweave into a network in the soil, which effectively enhances the strength and stability of the improved soil. Simultaneously, the fibers can form bridges across the adjacent micropores, leading to the merging of pores and transforming fine, dispersed micropores into larger, connected macropores. Lime promotes the flocculation of soil particles, forming larger aggregates and thus resulting in larger pores. The addition of fibers exerts an inhibitory effect on the flocculation reaction in the composite-improved soil. In conclusion, lignin fibers are an effective addition used to partially replace calcium admixture for the treatment of expansive soil, which provides a sustainable and environmentally friendly treatment scheme for reducing industrial waste.