Chemical stabilization is among the methods utilized to improve the shear strength properties and volumetric changes of problematic soils. This research assesses the possibility of using sludge ash from a wood and paper mill (SAWP) as an industrial sludge to improve the fat clay engineering characteristics. Thus, unconsolidated-undrained triaxial, direct shear, one-dimensional swelling, and consolidation tests were conducted. Results showed that shear strength parameters (both in short and long-term) increase with increasing SAWP contents and curing period due to the production of sufficient cementitious components and the formation of strong bonds between the particles. Investigating the direct shear test results indicated that the failure envelope in stabilized samples with high SAWP contents was slightly curved. Stabilized samples with high amounts of SAWP at low vertical stresses show brittle failure, while the type of failure observed for these samples at high vertical stresses is more ductile. Moreover, the magnitude of free swell gradually decreased with increasing SAWP contents. The replacement of clay particles with SAWP and flocculation and/or agglomeration of clay particles were the main reasons for this issue. Finally, the compression index, swell index, and coefficient of volume compressibility decrease with increasing SAWP content for the applied load increment, indicating the effect of stabilization in reducing the consolidation settlement of the layers. The test results revealed that the sludge ash used in this study can be used to enhance the engineering properties of fat clay.