It is of paramount importance to understand the hydration swelling and weakening properties of clay minerals, such as montmorillonite, to determine their mechanical responses during deep underground argillaceous engineering. In this study, the mineral components and microscopic structure of mudstone were characterised using X-ray powder diffraction and field-emission scanning electron microscopy. Experimental schemes were devised to determine the properties of mudstone under the influence of underground water and stress; these involved compacting montmorillonite particles with various water contents and conducting uniaxial compression tests. Experimental results demonstrated that compaction stress changes the microscopic structure of the montmorillonite matrix and affects its properties, and stress independency was found at particular water and stress conditions. Two equations were then obtained to describe the swelling and weakening properties of the montmorillonite matrix based on the discrete element method; further, the hydration swelling equation represents the linear decrease in the density of the montmorillonite matrix with an increase in the water content. It was also determined that the water dependency of uniaxial compressive strength can be described by negative quartic equations, and the uniaxial compressive strength of the montmorillonite matrix is just 0.04 MPa with a water content of 0.6. The experimental results are in good agreement with the calculated solutions and provide an important experimental basis to the understanding of the mechanical properties of montmorillonite-rich mudstones under the influence of underground water and stress.