The objective of this study was to evaluate the effect of fly ash in soil sub-grade modification on pavement design and quantify the cost-effectiveness of the construction. The research scope encompassed the modification of soil using fly ash, quantification of improvement through laboratory experimentation, design of flexible pavement at three design traffics, and estimation of initial cost of construction based on the volume of materials. With three levels of design traffics: low, medium, and high; three fly ash contents: 5, 10, and 15%, along with control soil, totaling 12 pavement sections were considered in the design. When fly ash content increased, the CBR of soil also increased consistently. Next, the improvement of soil properties quantified through CBR was used as an input for pavement design. It was found that there existed a scope for thickness reduction in both WMM and GSB layers. The highest reduction in thickness, around 14.5%, was noticed in the WMM layer at medium traffic conditions. Furthermore, the cost-effectiveness analysis during the initial construction phase revealed that the addition of fly ash did not have any negative impact on the cost-effectiveness of pavement. A marginal saving was found when 10% fly ash was used in soil modification under medium traffic conditions. Overall, it was envisaged that the research methodology adopted as part of this study would help road agencies, practitioners, engineers, and other stakeholders evaluate various alternative strategies for improving the quality of subgrade layers.