The activation of landslides and shallow faults is related to the shear behavior of soft interlayers during groundwater infiltration. Regarding the water sensitivity of clay minerals, the shear behavior of soft interlayers may rely more on weathering and water content than the requirement of shear displacement and normal stress for quartz grains. Here, we present the reduction characteristics of the shear resistance and permeability of mudstone granules considering weathering under dry-wet cycling. Within a shear displacement of 20 mm, the shear mode transformation of the weathered mudstone granules from strain hardening to strain softening was revealed from dry to wet conditions. However, this transition was not observed for unweathered mudstone and weathered sandstone samples. Correspondingly, the permeability perpendicular to the shear zone reduced 10~45 times with increasing normal stress according to post-shear measurements. Because weathered particles exhibited more micropores, the addition of water resulted in mineral separation and generated mud that filled the specimen pores. Thus, the sealing and lubrication effect of the mud decreased the porosity and shear resistance of the soft interlayer, along with increasing particle roundness. This rapid transformation mechanism within a limited displacement reveals the effect of water softening and weathering on the shear behavior of soft interlayers, which helps to understand landslide occurrence and shallow fault activation.