Expansive soil is a typically problematic soil that exhibits the engineering characteristics of swelling and shrinkage. It is highly sensitive to climatic changes, often leading to engineering disasters such as slope instability and landslides. While traditional inorganic chemical modifiers (such as lime, cement, etc.) can effectively improve soil strength, these modifiers are associated with environmental issues, particularly high carbon emissions. This study investigated the use of a novel green, low-carbon material—lignin fiber (LF)—for the modification of expansive soil. Unconfined compressive strength test, direct shear test, free swell test, mercury intrusion porosimetry, and scanning electron microscope were performed to analyze the mechanical properties of lignin fiber improved expansive soil. The effects of modifier dosage and curing age on the mechanical properties and microstructure of lignin fiber-lime composite-treated soil were also studied. The results indicated that 8% lignin fiber significantly improved both the shear and compressive strengths of expansive soil. After the optimal treatment, the mechanical properties of the composite improved soil were comparable to those of 4% lime-treated soil. Lignin fiber can effectively enhance the micro-structure of expansive soil by enhancing the bonds among soil particles. The results illustrated that lignin fiber, as a new low-carbon material, can significantly improve the engineering properties of expansive soil, to partially replace or reduce the use of traditional modifiers in the field of soil improvement.