Expansive soils present a significant geotechnical challenge due to their pronounced swell-shrink behavior, particularly in semi-arid regions. This study investigates the effectiveness of lime stabilization in improving the hydro-mechanical properties of expansive clay from Karak, Pakistan. This is the first study to integrate soil-water characteristic curve (SWCC) modeling with microstructural validation to assess lime-treated expansive soils in the semi-arid region of Pakistan. A comprehensive experimental program was conducted, which included index property tests, Standard proctor compaction, one-dimensional consolidation, SWCC determination, and microstructural analysis using scanning electron microscopy (SEM), energy-dispersive spectroscopy (EDS) and X-ray diffraction (XRD). Lime was added in proportions of 0%, 2%, 4%, and 6% by dry weight. The results show that lime treatment significantly reduced the swelling potential of expansive soils. Specifically, a 4% lime content reduced swelling potential by approximately 60%, lowered the plasticity index by over 70%, and increased the pre-consolidation stress by 140%, indicating enhanced soil strength and stability. Lime treatment also resulted in a more open fabric structure, as evidenced by a decrease in maximum dry density and an increased optimum moisture content. SEM images revealed a transformation from a dispersed to a flocculated microstructure. EDS and XRD analyses indicated the formation of cementitious compounds such as calcium silicate hydrate (C-S-H) and calcium aluminate hydrate (C-A-H), which contribute to the improved strength characteristics. SWCC analysis revealed that lime-treated soils retained water at higher suctions and exhibited higher air entry values (AEV), which resulted in reduced moisture sensitivity. Therefore, lime stabilization significantly improved the geotechnical properties of the investigated soil. The findings offer a robust basis for designing resilient subgrades and foundations in similarly challenging environments.