Reinforcing structural members and construction materials using recycled fibers has become popular in the past decades due to sustainable development concerns. The recycled fibers as soil reinforcement elements contribute to the increase in shear strength by distributing stresses exerted in the soil along the length of the recycled fibers. Loess, widely spread over the Chinese Loess Plateau, is featured with metastable structure, large porosity, and high water sensitivity. This study presents the results of applying the large-scale stress-controlled direct shear tests on the recycled straw fiber-reinforced loess. The formation mechanism of shearing behaviour enhancement of the loess by straw fiber inclusion is revealed. The associated strain-hardening behaviour can be manifested using the dilation angle or the difference in friction angle between the large-displacement friction angle and the peak friction angle. Further, the shear strength using the displacement-controlled direct shear tests presents good correspondence with that using the stress-controlled direct shear tests. The test results explore the potential of using the recycled straw fiber-reinforced loess to protect the fragile loess environment in the northwest of China.