As is widely accepted, cumulative strain and improvement mechanisms of stabilized soil are critical factors for the long-term reliable operation of expressways and high-speed railways. Based on relevant research findings, xanthan gum biopolymer is regarded as a green and environmentally friendly curing agent in comparison to traditional stabilizers, such as cement, lime, and fly ash. However, little attention has been devoted to the cumulative strain and improvement mechanisms of soil reinforced by xanthan gum biopolymer under traffic loading. In the current study, a series of laboratory tests, including cyclic triaxial tests and scanning electron microscopy (SEM) tests, were performed to investigate this issue in more detail. The influences of xanthan gum biopolymer content, curing time, moisture content, confining pressure, and cyclic stress amplitude on cumulative strain were analyzed. In addition, the cumulative strain model was proposed to provide a good description of experimental data. Finally, the microscopic structure of soil reinforced by xanthan gum biopolymer was analyzed to discuss the improvement mechanisms. The results show that the cumulative strain is strongly influenced by xanthan gum biopolymer content. For a given number of loading cycles, the greater the confining pressure, the smaller the cumulative strain. The calculated results of the cumulative strain model show a good agreement with test data. The “flocculent” hydrogel can form a denser structure and greater bonding strength in comparison to the “branch-like” and “net-like” hydrogels.