Every year, several onshore and offshore oil spills occur around the world. In addition to this, in recent times oil spillage due to pipeline vandalization is also seriously on the increase in the Niger Delta region of Nigeria and this has led to massive pollution of the ground. An extensive laboratory studies was conducted to determine the effect of oil contamination on the index and geotechnical characteristics of sois. Laboratory tests conducted include Atterberg limits, compaction characteristics on both natural and oil contaminated lateritic soil. Contaminated specimens were simulated in the laboratory by mixing the lateritic soil with oil at stepped concentrations of 2, 4 and 6% by weight of dry soil respectively. The results obtained show a reduction in maximum dry density, optimum moisture content and Atterberg limits due to oil contamination.