Stability assessment of cracked clay slopes has been a research hotspot in geotechnical engineering in recent years. The assessment work should include crack initiation/development and stability evaluation. However, there has been no universal method for predicting crack evolution until now. In addition, scholars have paid little attention to the coupling relationship between the evolution of cracks and the progressive failure process of macroscopic clay slopes and have seldom studied the ubiquitous diagonal cracks in clay slopes. In this work, the stress mechanism for initiation and development of major cracks was derived based on unsaturated soil mechanics and critical state soil mechanics considering the tensile, compression, and shear properties of clay. The correctness of the proposed theory was verified by constructing a large-scale, arc-shaped slip surface clay slope model. In the model test, earth pressure cells and displacement gauge were employed to monitor development of stresses within the clay slope and horizontal displacement of the slope shoulder, respectively, under the set load sequence. The results showed that the stress mechanism proposed in this paper could judge not only vertical cracks but also diagonal cracks. Horizontal stresses near the primary crack appeared as a result of stress saltation. The locations and depths of the major cracks could be determined by analyzing the differences in horizontal stress between adjacent measuring points under the same load step. The development of major crack–horizontal stress–displacement had intrinsic consistency, and the initiation and development of major cracks aggravated changes in displacement and horizontal stresses. The perspective of major crack–stress–displacement is helpful to wholly grasp the progressive failure process of cracked clay slopes and provide a reference for prediction of clay landslides.