To resolve the problem of large deformation of tunnel in shale caused by groundwater during construction in Northwestern Hubei, softening microscopic mechanisms and mechanical properties of water-saturated shale were investigated. At different water-saturated times, the water absorption and microstructure characteristics of shale were examined using X-ray diffraction, natural water absorption experiments and scanning electron microscope (SEM). Then evolution laws of strength and deformation parameters under different water-saturated times were analyzed by uniaxial compression tests. Experimental results show that, with the increase of saturation time, the water absorption of shale increased logarithmically, but the peak compressive strength and elastic modulus of shale decreased logarithmically. It is found that mechanical properties of shale changed rapidly within 20 days until stabilized after 50 days. As the chlorite and muscovite minerals in shale expand with the water, with increasing saturation time, the fine mineral particles were gradually stripped from the dispersed the lamellar structure. As a result, a large number of loose, porous flocs were produced. Due to the effect of hydration, the compact layer microstructure of shale became loose, and cementation among mineral particles was destroyed gradually, resulting in the growth of pores and cracks. Finally, the strength of shale and the ability to resist deformation were decreased, and the fracture surface became dense and interconnected.