This paper describes the effective utilization of industrial wastes such as ferric oxide powder and aluminum sludge for soil stabilization. Mixing these industrial wastes with hydrated lime to form some new type of stabilizers will be useful for both strength improvements of soils and environmental protection. The primary objective of this study is to investigate the effect of wastes on the strength development of stabilized soils. To perceive the strength development mechanisms of stabilized soils, X-ray diffraction (XRD) and scanning electron microscopy (SEM) methods were employed in order to evaluate the formation of chemical reaction products and microstructural changes occurred in the stabilized soils. The industrial wastes contained in stabilized soil improve the mechanical properties of soils by chemical reactions between the reacting elements of industrial wastes and clay minerals in the soil. In particular, adding aluminum sludge into ferrum lime lead to a marked improvement in the early strength or flexural strength of stabilized soils.