Expanded Polystyrene (EPS) geofoam, owing to its low density, high compressibility, and excellent energy absorption capacity, has been widely used as a lightweight fill material in geotechnical engineering. This study employs finite element analysis (FEA) program package, Abaqus, to systematically investigate the mechanical response and stability of EPS geofoam layers under static loading conditions. In the numerical model, the soft subsoil is represented using the Mohr–Coulomb constitutive model, while the EPS material is modelled as linear elastic. The interaction between the EPS and surrounding soil is also considered, including interface friction and potential slip behaviour. Stability is evaluated through strength reduction methods in combination with displacement criteria. The results indicate that increasing EPS density and interface friction significantly reduces block-to-block relative sliding and local stress concentration. Moreover, as the applied load increases to a critical threshold, the embankment response transitions from compression-dominated to shear-dominated failure, with interface conditions exerting a decisive influence on the failure state. The findings provide design-oriented insights into parameter selection and stability control strategies for EPS geofoam embankments under static loading.