Confronted with the dual challenges of climate change and resource depletion, the green transformation of the construction industry is imperative. This study analyzes the life-cycle environmental benefits of clay materials such as low embodied energy, recyclability, and moisture-buffering capacity which refers to the material’s ability to regulate indoor humidity by absorbing and releasing moisture. Case studies from China (Gansu, Yunnan, Beijing) and abroad demonstrate the technical feasibility and artistic value of clay in construction. The study also evaluates potential challenges in different perspectives including resource, technological, economic, and policy-related for the large-scale adoption of clay in China. The main findings indicate that clay-based materials hold significant potential for reducing the negative environmental impacts of the construction industry in China. However, widespread adoption depends on overcoming barriers in technical standardization and supply chain development. It is recommended that policymakers accelerate the development of national standards and promote demonstration projects to increase the public’s confidence in the application of these sustainable construction materials.