Structural fill is utilized to improve the bearing capacity and reduce settlement below foundations supported on weak soils or when foundations are supported on filled up soil. The present study evaluates the potential application of municipal solid waste finer fraction (MSW-FF) as a sustainable structural fill material. The finer fraction constitutes significant proportion of old landfill waste in cities, and do not easily find applications as compared to the other fraction of old waste. The present work determines the engineering properties of MSW-FF. A detailed assessment has also been carried out to evaluate the bearing capacity, settlement and modulus of subgrade reaction for the shallow foundation of different sizes and shapes resting on (a) soil with low subgrade modulus and (b) soil improved with a layer of MSW-FF as structural fill. A soil-structure interaction analysis has also been carried out by utilizing STAAD Pro. software, to understand the effect of soil and foundation stiffness on the foundation design parameters, viz., base pressure, settlement, bending moment and shear stress in shallow foundations for both cases (natural soil and with MSW-FF as structural fill). The comparison of different foundation systems resting on soil improved with MSW-FF structural fill layer and soil with low subgrade modulus has been presented to demonstrate the efficacy of MSW-FF as a suitable structural fill material. From the soil-structure interaction analysis, it is observed that the effect of soil subgrade modulus on foundation base pressure and settlement is prominent, while having a negligible effect of bending moment and shear stress in the foundation. Further, the relative stiffness of foundation and soil has a significant effect on the foundation design parameters. The study results are quite encouraging with respect to the potential of utilizing MSW-FF as a sustainable structural fill and put forward a new and promising alternate material for application in different infrastructure projects.