This research examines the impact of lateral constraints on the deformation and mechanical properties of compacted loess, a prevalent material for road construction foundations. Through laboratory compression tests on samples from a specific project area, it evaluates how compactness, confining pressures, and vertical loads affect compacted loess's stress-strain behavior and lateral deformation. The study demonstrates that lateral constraints significantly influence soil deformation behavior and mechanical characteristics, particularly under complete confinement. A new formula for accurately calculating soil compression deformation in engineering practices is introduced, enhancing the prediction and management of subgrade settlement in loess regions. This work contributes to improved construction methodologies and infrastructure durability in challenging terrains by offering insights into compacted loess's compressibility under various lateral constraints.