Abstract: A certain thickness of lime-improved loess layer, commonly known as the lime soil layer, is often set in the foundation of highway subgrades and buildings in loess areas, and most of this layer of soil is in an unsaturated state. In order to explore the water-reteniton characteristics and microscopic properties of the lime-soil layer, the unsaturated soil consolidation instrument, the filter paper method and the scanning electron microscope are used to conduct the soil-water characteristic tests and the microscopic tests on lime-modified loess, and the soil-water characteristics of unsaturated loess with different compaction degrees are studied. Based on the V-G model, the soil-water characteristic model under different compaction degrees is revised, and a soil-water characteristic model considering the coupling of water and compaction degree is proposed. At the same time, the microscopic properties of the lime-modified loess under different compaction degrees are analyzed. The research shows that the compaction degree has a certain influence on the soil-water characteristic curves of the compacted loess and the lime-improved loess. With the increase of the compaction degree, the air-entry values of the compacted and lime-improved loess gradually increase, and the water-retention capacity increases. The soil-water characteristic curves of the lime-modified loess with different compaction degrees can be expressed by a unified model, and the model can describe the soil-water characteristics well. Through the scanning electron microscope tests, the accuracy of the results of the effects of the compaction degree on the soil-water characteristics is verified from the microstructure.