Black cotton soil, a significant geological feature spanning various Indian states, encompasses almost 20% of the nation’s usable land. Regions like Maharashtra, Madhya Pradesh, Chhattisgarh, parts of Gujarat, Karnataka, Telangana, Andhra Pradesh, and Tamil Nadu are renowned for their extensive deposits of this soil type, presenting challenges for construction and infrastructure development due to high volumetric changes, low shear strength, and poor bearing capacity. To tackle these challenges, researchers have explored diverse soil stabilization techniques, employing stabilizers such as lime, cement, rice husk ash, and fly ash. This study shifts the focus to investigate the impact of lime stabilization on two critical soil properties—dilatancy and Poisson’s ratio—in black cotton soil. Lime was introduced in varying proportions (2, 4, 6, 8, and 10% by weight), and specimens were meticulously prepared for direct shear and triaxial tests, followed by one day of curing in desiccators. Results indicate a influence of lime on the soil’s dilatancy and Poisson’s ratio properties, with dilatancy varying between 1.5 and 5.96, and Poisson’s ratio ranging from 0.55 to 0.59, notably changing with a 6% lime content. This study contributes valuable insights into the potential of lime stabilization to enhance the engineering properties of black cotton soil, elucidating the intricate relationship between lime content and the soil’s response in terms of dilatancy and Poisson’s ratio. These findings can inform improved construction practices in regions with extensive black cotton soil deposits.