Based on an actual highway project traversing an acute inclined shallow mined-out area in Urumqi, China, a scale physical model experiment and numerical simulation method were adopted to study the stability and settlement mechanism of the highway subgrade and substrata overlying an acute inclined mined-out area under different mining heights and mining angles. Plastic pneumatic capsules with different shapes were embedded in similar strata made from clay, fine sand, and Vaseline to simulate the mined-out cavity. The capsule was removed to simulate the process of mining, and five cases with different mining heights and angles were studied. According to similarity theory, a physical model was established with a geometric similarity coefficient of 50 of the actual prototype, whereas the numerical model adopted the full-scale value. The physical model experiments and numerical simulations show that the settlement of the subgrade and substrata overlying the mined-out area is directly proportional to the mining height but inversely proportional to the mining angle. According to the settlement contour obtained by numerical simulations, which were in accordance with the physical model experiment results, two parameters, the free slip volume and the free surface, were defined to assess the stability of the subgrade and substrata overlying the mined-out area. The free slip volume and free surface calculation results demonstrate a strong relationship between the settlement and free slip volume and free surface. Therefore, the values of free slip volume and free surface could be reliable reference parameters to evaluate the stability of the subgrade and substrata overlying mined-out areas.