The integration of red mud (RM), an alkaline by-product of alumina production, into pavement construction has both promising opportunities as a potential bulk utilization route (in million-ton scale) and substantial challenges as well. RM’s high alkalinity poses environmental hazards if not managed correctly, yet its potential as a raw material in construction could mitigate these risks. Recent research has explored the transformation of RM into advanced construction materials such as geopolymer concrete and grouting materials for pouring into semi-flexible pavements. Sensitivity analyses and microstructural evaluations indicate that RM-based materials, when optimized with additives like ground granulated blast furnace slag and alkali activators, demonstrate improved fluidity, early strength, and heavy metal encapsulation, thereby minimizing environmental threats. Laboratory studies have demonstrated that RM, when incorporated into pavement materials, results in the improvement of mechanical properties and durability. RM-blended asphalt mixtures exhibit improved stiffness, rutting resistance, and moisture resistance. RM has also been found to augment the mechanical properties and sustainability of geopolymer concrete by improving its strength, durability, and environmental benefits when combined with materials like blast furnace slag, metakaolin, fly ash etc. Before the incorporation of RM into pavement layers becomes a widely accepted practice, its compatibility with normally applied pavement materials, long-term durability and leaching characteristics for environmental safety must be discussed and addressed scientifically. Potentially, its pre-neutralization of alkaline components with waste acidic gases (e.g., CO2 and SOX) is emerging as a promising approach in circular economy framework for utilization in pavements. In this paper, we focus on these aspects in detail and systematically present the material properties of RM affecting the performance of pavement layers via coupled hydro-mechanical and chemical interactions.