Engineering construction in loess areas often requires improvement of loess. Basalt fiber-reinforced soil due to complexity of material composition often exhibits poorly predictable mechanical behavior. In this study, digital image technology-based unconsolidated-undrained (UU) triaxial shear tests were carried out on loess samples at three fiber lengths (L) and four fiber contents (η). Results prove the improvement of the shear strength of loess by basalt fiber inclusion, which varies in inverted u-shaped pattern with fiber length or fiber content, with the maximum at η = 0.6%, L = 12 mm. Digital Image Technology was employed to analyze the damage characteristics and strain field of the surface of the sample at different loading time. The volumetric strain of the reinforced sample decreases at higher fiber content or fiber length, from shear contraction to dilatancy. The unreinforced sample exhibits a typical brittle failure mode with visible shear band, while plastic failure for reinforced samples with an overall bulging failure mode. A statistical damage constitutive model of fiber-reinforced loess was established with limited parameters calibrated. The rationality of the model was verified by comparisons of measured and calculated stress-strain data.