Railway transportation is one of the most widely used modes of transport in many countries. Ballast, the material that supports railway tracks, is crucial for providing track stability. Traditional ballast materials, such as crushed stone, gravel, and slag, are extensively utilized in railway systems due to their low initial investment and technical advantages. However, the properties of these materials deteriorate over time because of the cyclic loading of trains and environmental factors. This study inspects the use of shredded rubber as an alternative to traditional ballast material in rail track applications. Shredded rubber offers several benefits, including durability, shock absorption, noise reduction, and sustainability. The research aimed to determine the optimal percentage of shredded rubber to replace traditional ballast material by weight. Experiments were conducted using a large-scale direct shear apparatus under a normal stress of 60 kPa to measure the necessary parameters. These results were then used to calibrate and validate numerical model with the discrete element method (DEM). Initially, ballast and rubber particles were collected, and a suitable ballast gradation was selected based on the standards used in Sri Lankan rail tracks. The samples were prepared by mixing shredded rubber with ballast in varying weight percentages of 0, 5, 10, 12.5, and 15%. Subsequently, large-scale direct shear tests were performed on these prepared samples. The results included a ballast breakage analysis for all tested samples, from which the ballast breakage index (BBI) values were obtained. The findings indicate that increasing the rubber content in ballast mixtures reduces peak shear stress and dilation effects. Moreover, incorporating 10–15% shredded rubber by weight can reduce ballast breakage by 52–57%, thereby enhancing durability. The study concludes that the optimal shredded rubber content for ballast replacement is between 10–15% by weight.