Geotechnical applications are useful for environmental protection of surface as well as ground water by liner system. Use of clay soils in constructing low permeability liners that covers waste containment is common and cost effective. In arid and semi-arid regions, desiccation and shrinkage cracking adversely affect the integrity of compacted clay liners. The technique and methodology of combining sand, cement, polyethylene chips with medium plastic soil was used for the first time in Pakistan. A mixture of sand, cement and polyethylene chips in different proportions with medium plastic clay has been proposed to reduce the shrinkage potential of medium plastic clay. The basic purpose of this soil modification is to control the volumetric shrinkage of medium plastic clay. The polyethylene bags from garbage dumps were reused for making polyethylene chips, which will not only reduce environmental hazardous waste but also provide a useful additive for controlling soil shrinkage. It was hypothesized that combined effect of sand, cement and polyethylene chips would control the shrinkage potential of soil. The study entails characterization of soil, interaction with synthetic leachate, soil treatment in two phases and effect of leachate on treated soil. About three hundred specimens through forty five different combinations of sand, cement and recycled polyethylene chips were used to optimize volumetric shrinkage and compressive strength properties of soil. The study also evaluates the effect of synthetic leachate on soil samples. Microstructural analysis including Energy Dispersive X-Ray, X-Ray Diffraction and Scanning Electronic Microscopy were used to evaluate the efficacy of treated soil. The combination of additives with medium plastic soil not only reduced the volumetric shrinkage and permeability but also improved the unconfined compressive strength of treated soil. Regression based statistical analysis results revealed that fair correlation exists between mixture of medium plastic clay, sand, cement, polyethylene chips and volumetric shrinkage.