As one of the main types of subgrade, the slope instability of high-fill compacted loess embankment occurs frequently due to the increase of water content caused by rainfall. The effect of water content on density, dry density and shear strength of loess sampling from the embankment-fill of Shanyin-Pinglu expressway, is investigated by a series of laboratory soil tests mainly including compaction test and triaxial compression test. The results show that the water content has great influence on the density and dry density of loess fill. In addition, with the variation of water content, the cohesion increases while the internal friction angle decreases. According to the tests results, the numerical model is established using FLAC3D and the stability of reinforced and unreinforced embankment with different water contents based on strength reduction method is studied. The results show that the safety factor of embankment decreases with the increase of water content of compacted loess which can lead to the stability of embankment decreases. Moreover, the safety factor of embankment increases as the geogrid layers increase. The integrity of embankment is well enhanced with the inclusion of geogrid, thus the possibility of slope instability is reduced.