The study dealt with the effect of addition of sugarcane bagasse ash (BA) on the strength development of a lime stabilized expansive soil. Unlike previous investigations with combinations of lime and BA, this study compares the effect of lime contents determined by scientifically established procedures and the effect of BA on the stabilization of lime at different proportions with additional microstructural investigations. The minimum lime content required for stabilization known as initial consumption of lime (ICL) was determined using the Eades and Grim pH test as 5.5%. The optimum lime content (OLC) was determined using unconfined compression strength (UCS) tests as 7%. Another lime content less than ICL was randomly adopted as 3%. The three lime contents were mixed with 0.25%, 0.5%, 1%, and 2% BA. UCS samples of dimension 38 mm × 76 mm were prepared at a fixed dry density and moisture content and cured for periods of 2 hours (0 days), 3, 7, 14, and 28 days to study the development of strength and effect of BA. Mineralogical and microstructural analyses were performed on the pulverized UCS samples after failure. The results revealed that the addition of BA increased the immediate, early, and delayed strength of lime stabilized soil further, even when the lime content was lower than ICL. Addition of BA produced maximum immediate, early, and delayed strength gains of 58.3%, 20.7%, and 32.7%, respectively. Higher proportion of BA was required when lime content was above ICL, for maximum strength. Addition of BA resulted in better utilization of quartz in lime-soil reactions leading to formation of CSH and CAH minerals. A dense compact matrix was seen on analyzing the microstructure of the stabilized soil composite.