This study investigated the hydrophobic and mechanical enhancement of silica sands treated with tung oil, a natural hydrophobic stabilizer, for road embankment applications. Through laboratory testing including apparent contact angle (ACA) and water drop penetration time (WDPT) measurements, uniaxial compression tests, and direct shear box tests, the effects of mean particle size (0.24–0.99 mm), tung oil concentration (0.01%–5%), and heating duration (1–14 days at 60 °C) were quantified. Key findings revealed: (1) peak hydrophobicity (ACA = 95.1°–128.7°, WDPT > 3600 s) occurred at 0.05% tung oil concentration, beyond which a reduced water repellency was observed; (2) both peak and near-constant-volume shear strength, along with their corresponding parameters (friction angle and cohesion), increased with tung oil concentration and heating duration but decreased with larger mean particle size, due to the decreased interparticle bonding demonstrated by scanning electron microscopy analysis; (3) stabilization efficiency showed a similar trend to shear strength but decreased with higher normal stresses. The results demonstrated tung oil’s potential dual functionality for cost-effective, zone-specific subgrade treatment, with low concentrations (0.05%) serving as impervious barriers and higher concentrations (3%) forming bonded load-bearing layers.