Steel slag accumulation is one of the major issues for steel manufacturing companies, because it occupies a large portion of a company’s yard. Investigators have suggested various applications for using slag in other industries. There is great potential for using slag as an aggregate in road and railway construction. Evidence demonstrates the compatibility of slag for road base and subbase construction. However, the use of slag as a subballast for railway construction has not been investigated thoroughly. This research studied the application of slag to subballast railway construction. A railway subballast layer requires a high shear strength, which is greater than slag’s shear strength. Therefore, the authors modified the slag with 1%, 2%, and 3% gilsonite, or natural binder, and performed Los Angeles abrasion, direct shear, and California bearing ratio tests on the modified slag. The results of all experiments indicated significant improvement in the modified slag’s shear strength properties, which makes gilsonite-modified slag a potential replacement for traditional subballast material.