Clayey soil is highly problematic soil that covers almost all regions in india. Soils with poor engineering properties were usually removed and replaced or design would be changed to suit the weak soil. This would often be expensive and time consuming. In this context, soil stabilization is an attractive alternative for its simplicity and economy. Commonly used stabilizers are cement and lime. But it is not easy to apply soil stabilization to cover a large area due to increased cost of stabilizers. Cost can be minimized by replacing certain portion with industrial wastes. In present work, the effect of iron dust on compaction and compressive strength properties of soil are studied. Iron dust which is mixed with soil at different percentage (0%, 2, 4, 6 and 8%) by weight of soil. The variations in compaction (omc and mdd) and compressive strength characteristics with respect to variations in percentage of iron dust are observed by conducting standard proctor test and unconfined compression test.