Nowadays, the remediation of agricultural soils polluted by Cd and Pb is urgently required. In this study, we used the palygorskite (PAL) as a carrier for nanoscale zero-valent iron (nZVI) to synthesize a new type of stabilizer (PAL-nZVI). After 45 days of incubation, the soil pH increased by 1.80 pH units. The batch experiments exhibited that the bioavailability and leaching toxicity decreased significantly (P < 0.05) with the addition of PAL-nZVI. The data concluded that the 30 days was a critical period for Cd and Pb stabilization and the optimum dosage of PAL-nZVI was 6%. Moreover, the application of PAL-nZVI could transform the speciation of Cd and Pb from labile fraction to stable fraction (the maximum residual percentage of Cd and Pb increased by 27.34% and 36.57%, respectively) after 30 days of incubation. The pot experiments indicated that the application of PAL-nZVI could enhance the growth of corn (Zea mays L.), reduce the accumulation of heavy metals from the soil and decrease the phytotoxicity of Cd and Pb in the soil. These results suggested that the PAL-nZVI, which is high-efficiency and low-cost, can be a feasible stabilizer for the soils contaminated by Cd and Pb.