The waste generated by aluminum industry is known as bauxite residue or red mud. By nature, the red mud is toxic which creates problem for disposal. Due to the alkaline nature it is unsuitable for construction and vegetation. Every year more or less 75 million tons of red mud is generated worldwide. RBI grade 81 is a powdered cementitious stabilizer. It improves the engineering properties of several types of soils. This paper presents investigation carried out for better understanding on effect of RBI Grade 81 on red mud properties to be used in subgrades. It is found that with optimum dose of RBI grade 81 as 4%, liquid limit decreases and plastic limit increase. MDD values decrease slightly but the CBR value of the red mud increase with addition of RBI grade 81.