The traditional treatment of red clay using inorganic materials leads to many serious environmental problems. The study investigates the mechanical properties of red clay using an environmental-friendly material—xanthan gum—through confined compression, direct shear, and scanning electron microscope tests. At the macroscale, xanthan gum content and curing age had obvious effects on the compressibility, presenting the treated red clay was in the category of low compressibility which gradually increased when xanthan gum content exceeded 1.5%. The xanthan gum content and curing age also had significant influences on the cohesion but not on the internal friction angle. The shear strength of red clay can be improved by increasing the cohesion without obviously changing the friction characteristics. After curing for 28 days, the cohesion and internal friction angle of 2.0% xanthan gum-treated soil were effectively improved to 170.44 kPa and 20.56°, which were increased by 69.79% and 9.36°, respectively, compared with untreated red clay. Microscopic analysis indicated that the strengthening mechanism by xanthan gum was derived from changing the arrangement characteristics of soil particles and forming hard biopolymer-red clay matrices. The proper xanthan gum can effectively wrap clay particles and fill pore spaces. However, the extensive stacking of gels would also reduce the effective connection of clay particles and produce local weak points in the soil, resulting in attenuation of mechanical properties. This study enriches the treatment measure of red clay and provides beneficial experiences for biopolymer application on special clay.