Alkali activated fly ash (AAFA), also named “geopolymer”, has emerged as a novel engineering material in the construction industry. This material is normally formed by the reaction between fly ash and aqueous hydroxide or alkali silicate solution. With proper mix design, AAFA can present comparable or superior engineering properties to Portland cement. Moreover, this material shows great potential for sustainable development since its production has a significantly lower CO2 emission than the production of Portland cement. This study aims at a better understanding of the microstructure and engineering properties (including mechanical properties, permeability and shrinkage) of AAFA with different activator content, i.e. SiO2 and Na2O. The evaluation of the mix proportion of the activator is not only based on the early age properties of AAFA, e.g. setting time, workability, heat release, mechanical properties , but also taking into account the durability related issues, such as permeability and shrinkage. The measurements results of AAFA were compared with those of Portland cement. These comparisons and further discussions reveal how the differences in microstructure affect the macro-properties of these two systems. In addition, the different performance of AAFA and Portland cement should be carefully evaluated when AAFA is used as an alternative to Portland cement.