This paper presents internal erosion behaviour of an erodible soil stabilized by chemical admixtures using a novel Process Simulation Apparatus for Internal Crack Erosion (PSAICE), designed and built at University of Wollongong. Laboratory tests were carried out on typical erodible soils (collected from Wombeyan caves, Australia) stabilised using chemical admixtures such as lignosulfonate and cement. Test results reveal that the erosion parameters such as critical shear stress and coefficient of soil erosion were improved with the increase in the amount of chemicals. It has been seen that lignosulfonate exhibits better performance in stabilizing the erodible soil compared to cement. Based on the observed erosion test results, an analytical model has been developed considering the tensile behavior based on the law of conservation of energy. Moreover, the stabilization mechanism of lignosulfonate treated soil has been developed using chemical analysis such as X-ray Diffraction (XRD) and Fourier Transform Infrared (FTIR) Spectroscopy studies.