Urbanization generates large quantities of arsenic-contaminated excavated soils that pose environmental risks due to arsenic volatilization during high-temperature sintering processes. While these soils have potential for recycling into construction materials, their reuse is hindered by arsenic release. This study demonstrated calcium hydroxide (Ca(OH)₂) as a highly effective additive for suppressing arsenic volatilization during soil sintering, while simultaneously improving material properties. Through comprehensive characterization using inductively coupled plasma-mass spectrometry (ICP-MS), scanning electron microscopy (SEM) and X-ray microtomography (μCT), energy dispersive spectroscopy (EDS), X-ray diffraction (XRD), Fourier Transform Infrared Spectroscopy (FTIR) and X-ray photoelectron spectroscopy (XPS), results demonstrated that Ca(OH)₂ addition (0.5–2 wt.%) reduces arsenic volatilization by 57% through formation of thermally stable calcium arsenate (Ca₃(AsO₄)₂). Ca(OH)₂ acted via two mechanisms: (a) chemical immobilization through Ca-As-O compound formation, (b) physical encapsulation in a calcium-aluminosilicate matrix during liquid-phase sintering, and (c) pH buffering that maintains arsenic in less volatile forms. Optimal performance was achieved at 0.5% Ca(OH)₂, yielding 9.14 MPa compressive strength (29% increase) with minimal arsenic leaching (<110 ppb). Microstructural analysis showed Ca(OH)₂ promoted densification while higher doses increased porosity. This work provides a practical solution for safe reuse of arsenic-contaminated soils, addressing both environmental concerns and material performance requirements for construction applications.