Soil degradation and desertification from agricultural land use is a serious and growing problem worldwide. Bringing degraded soils back into production is crucial to stop the cycle of land degradation, followed by abandonment and a subsequent shift of agricultural pressure to previously uncultivated soils. To return degraded and desertified landscapes to productivity, sandy soils must first be improved to enhance water and nutrient holding capacity. In this study we examine the ability of incorporated coarse woodchips to alter water holding capacity in very sandy, degraded soils in the field, complemented by soil column experiments in the laboratory examining the mechanisms behind changes in water retention. In the second phase of our lab studies, we examined nutrient losses, both soluble and gaseous, from laboratory-scale soil columns under different fertilization application regimes. Coarse woodchips incorporated into the soil increased water holding capacity by 16% in the field and 18% in the laboratory which was attributed to absorption of water by the woodchips, with limited evidence of the occurrence of flow path disruption. Soluble nutrient losses of nitrogen (N) and phosphorus (P) were smallest when fertilizer was applied in liquid form, as opposed to incorporated or surface-applied dry granules. Carbon dioxide emissions increased by 200% in the presence of woodchips, likely due to increased respiration by the microbial biomass. This study suggests that incorporating coarse wood chips into the soil is a viable strategy for increasing water and nutrient retention in very sandy and degraded soils and can provide a basis for enhancing ecological processes. More work is needed to examine whether increased water retention by woodchips also increases the availability of water and nutrients to plants.