This paper presents the results of a laboratory study on the effect of oil contamination on the particle size distribution and plasticity characteristics of lateritic soil. The soil was artificially contaminated with a maximum 6 % oil content by weight of dry soil. The results show that there was a substantial reduction in the amount of fines content with higher amounts of oil in the soil matrix. The percentage of fine fraction in the natural soil was 86.9 % and on contamination with maximum 6 % oil content by weight of dry soil at optimum moisture content (OMC) the fine fraction reduced to 1.4 %. The plasticity index decreased from 16.0 to 8.5 % when contaminated with 6 % oil content by weight of dry soil. The plasticity modulus (PM), plasticity product (PP), the shrinkage modulus (SM) and the grading modulus (GM) decreased with increasing amounts of oil content.