Abstract: The shaly sandstone which is taken from a slope of the Three Gorges Reservoir is studied. Considering different wetting-drying cycles, the mechanical properties of shaly sandstone are investigated through uniaxial and triaxial compression tests. The microstructural change law of shaly sandstone is also studied using the scanning electron microscopy. The research reveals that with the increasing wetting-drying cycles (1~20), the peak stress, elastic modulus, cohesion and internal friction angle of shaly sandstone decrease. But the peak strain shows two stages of falling and stability. The microstructural change law of shaly sandstone can be summarized as three stages of regular, porous and cracking properties. By using the discrete element software PFC^2D, the influences of wetting-drying cycles on contact network of shaly sandstone grains, distribution of chains and distribution of cracks are studied. Based on the test results, the expression of Mohr-Coulomb strength theory for shaly sandstone is modified considering wetting-drying cycles.