Compacted clays in landfill applications are subjected to both physico-chemical changes and wet–dry cycles. Physico-chemical interactions occur at the microstructural level between the clay particles and chemical constituents such as brine solutions or leachates generated from landfill waste. Furthermore, the volumetric changes during wetting and drying also cause microstructural changes to compacted clays. The microstructural changes due to the physico-chemical interactions and wet–dry cycles are reflected at the macrostructural level and govern the macro-behaviour of compacted clays. Therefore, this paper brings out the combined effect of the interacting fluid and wet–dry cycles on volume change, microstructure and hydraulic conductivity of compacted clay soil. To achieve this, the compacted clay specimens were inundated with distilled water and sodium chloride (NaCl) solutions during wetting cycles. The experimental results showed that the ability of clay particles to swell at microstructural level and decrease the size of macropores in compacted clay was completely lost with 4 M sodium chloride solution and with increase in wet–dry cycles. Thus, the hydraulic conductivity of compacted clay specimen inundated with 4 M sodium chloride solution was unusually high at the end of the second and further wetting cycles even when subjected to higher effective confining pressures. Copyright © ICE Publishing, all rights reserved.