Expansive soil covers the vast area of Mengzi, Yunnan, China, and creates numerous hazards for construction projects. When treating expansive soil, a modifier is usually added to inhibit its expansion and increase its strength. Lignin and its derivatives can better meet the requirements of expansive soil treatment and have become the preferred choice to replace traditional inorganic modifiers. Lignin is a green and environmentally friendly physical improvement material. In this study, lignin was used to improve soil, alone and combined with its derivatives, and the physical and mechanical properties of the improved soil were studied. Combined with an unconfined compressive strength test, a low-stress direct shear test, and a scanning electron microscopy test, the mechanism of lignin and its derivatives for the improvement of expansive soil is discussed. When calcium lignosulfonate alone was added, the improved soil’s expansion rate decreased, the soil’s water-holding capacity decreased, and its strength increased. Furthermore, the inclusion of 3% calcium lignosulfonate was the best. When the expansive soil was improved with the optimal calcium lignosulfonate content (3% CL) and composite lignin fibers, the strength of the soil body was further improved, the toughness was enhanced, and it shows plastic swelling failure and good water stability. 3% calcium lignosulfonate and 1.5% lignin fiber was the best for composite improvement as; it offered the optimal degree of particle aggregation and the development of pores and cracks was better inhibited, even though the fiber distribution was messy. This study shows that lignin and its derivatives can be used instead of inorganic modifiers to treat expansive soils to reduce the number of inorganic modifiers, and provided a sustainable treatment plan for reducing industrial waste.