Shrinkage of expansive soils may cause serious problems to geotechnical and geo-environmental structures. In this study, the shrinkage behaviour of compacted clay treated with 4% lime was investigated. The samples of compacted clay without lime-treatment were also tested for the purpose of comparison. Besides, changes in microstructure were analysed by mercury intrusion porosimetry (MIP) tests on both treated and untreated samples. Results showed that the shrinkage curve of untreated sample is close and almost parallel to the saturation line, followed by a retarded rate upon further drying, approaching the compacted shrinkage limit. By contrast, the shrinkage curve of lime-treated soil is located leftwards and exhibits a higher compacted shrinkage limit. Further analysis showed that more left location is attributed to the more dry macro-pores in the treated samples, and the higher compacted shrinkage limit is due to the formation of large aggregates. In addition, the curing time effect seems to be insignificant on the shrinkage behaviour of lime-treated soil.