This paper presents the strength, compressibility and microstructural behaviour of lime-slag treated Coode Island Silt (CIS). The microstructure was investigated using X-Ray Diffraction (XRD) and Scanning Electron Microscopy (SEM), while strength and compressibility properties of the treated CIS were measured using Unconfined Compressive Strength (UCS) and Oedometer Consolidation tests. Bulk untreated CIS is sampled from an excavation site in Melbourne CBD, while hydrated lime and Ground Granulated Blast Furnace Slag (GGBFS) are used as binders. Results of UCS tests on CIS treated with fixed lime and varying slag contents showed an increase in unconfined compressive strength with increasing slag contents and curing periods. The role of lime in the activation of slag is also seen to have an upper limit whereby excess proportions fail to provide significant additional benefit. Oedometer consolidation test results of treated CIS showed an increase in apparent pre-consolidation pressure and decrease in void ratio with an increase in slag content. This is due to the formation of more crystalline cementitious products, which accelerate the cementation effect between lime-slag and clay particles. XRD analyses of lime-slag treated clay showed the existence of numerous reaction products such as Calcium Hydrate (CH) and Calcium Silicate Hydrate (C-S-H) which facilitates the strength increment. Slag was found to be very active in promoting the pozzolanic reaction with lime, as evidenced from the presence of crystalline reticular cementitious product (C-S-H) in the SEM images.