The hydro-mechanical properties of expansive soils stabilized with various industrial by-products are susceptible to undergo various changes in the long term on exposure to seasonal variations. Also, the binders derived from industrial by-products may often contain traces of heavy metals and may lead to secondary contamination of soil and water. This points to the strong need for the assessment of suitability of such binders in terms of durability and sustainability for use in stabilization of expansive soils. Ground granulated blast furnace slag (GGBFS), a largely available industrial waste material, is used in this study as a hydraulic binder in soil stabilization. In this study, a series of tests were performed to investigate the effect of wetting and drying cycles on the unconfined compressive strength (UCS) of bentonite–sand mixtures of two different proportions treated with GGBFS along with the determination of the quality of the leachate from the GGBFS-stabilized samples. Tests were conducted on the stabilized samples after curing for 14 days and soaking in water for 5 h by the capillary soaking method. The dry cycle was performed by oven-drying the samples for 42 h. The wet and dry cycles were repeated and after each cycle of wetting and drying, UCS and the volume change of the samples were determined. The optimum content of GGBFS was arrived at based on the performance of stabilized soil after continuous wet and dry conditions. Further, the possible contamination effects of GGBFS in expansive soil stabilization were investigated by leachate analysis and by analysing various inorganic chemical concentrations by the ICP technique. The results were compared with standard permissible limits to confirm the material to be used as a sustainable binder.