In this study, the extent of the smear zone and the reduction of permeability and water content within the smear zone were investigated using a large-scale consolidometer. The installation of vertical drains by means of a mandrel causes significant disturbance of the subsoil surrounding the mandrel, resulting in a smear zone. The extent of the smear zone for Moruya clay New South Wales, Australia was estimated on the basis of normalized permeability and the reduction of water content by taking undisturbed samples horizontally and vertically at different locations. This study reveals that a significant reduction in water content and horizontal permeability takes place towards the drain, whereas the variation in the vertical permeability is negligible. The smear zone for Moruya clay was found to be 2.5 times the equivalent radius of the mandrel with the horizontal permeability varying from 1.09 to 1.64, an average of 1.34 times smaller than that of the undisturbed zone. Finally, a correlation between the permeability decrease and water content reduction within smear zone is proposed.