In Oman, soil health faces challenges from high temperatures, limited rainfall, low fertility, and poor soil water retention. Techniques such as organic matter addition and capillary barrier utilization have been employed to augment soil fertility and water retention. This study explored the interactive effects of combining biochar and capillary barriers on soil water and air dynamics, and their subsequent impact on soil microbial properties, including alterations in microbial activities, enumeration, and species diversity. The study also evaluated the effects of this combination on overall soil health. The experiment was conducted using outdoor columns with two soil textures (sandy and silty loam), and biochar derived from date palm leaves pyrolyzed at 300°C. Six treatments were tested: Homogeneous (H) as a control, Homogeneous with 5% w/w biochar (HBC), Classical capillary barrier (CB), consisting of a sand layer over a silt loam soil layer; Classical capillary barrier with 5% w/w biochar (CB BC); Smart capillary barrier (SCB), comprising silt loam soil blocks surrounded by sand layers; and Smart capillary barrier with 5% w/w biochar (SCB BC). Each treatment was replicated across four columns, with soil moisture sensors at depths of 13 cm (B1) and 36 cm (B2). Results indicated that the integration of biochar with smart capillary barriers significantly improves soil water retention, particularly at the lower soil depth. On day 83, the smart capillary barrier with biochar exhibited superior water retention, with the highest soil moisture content (0.333), surpassing HBC (0.248) and CB BC (0.246) by 34% and 35%, respectively. However, no significant impact of biochar on soil water was observed at the upper depth (B1). Biochar application resulted in a decrease in pH and an increase in electrical conductivity (EC1:5). The highest pH reduction, from 8.150 to 7.350, was found in SCB BC (upper depth, first sampling). The highest EC1:5 increase, from 0.291 to 1.591 dS/m, was found in CB BC (upper depth, first sampling). Moreover, SCB BC enhanced soil respiration rates at both depths compared to other treatments. At the first sampling, SCB BC at the top exhibited 20% and 14% higher respiration than CB BC and HBC, respectively. However, microbial enumeration varied: SCB BC initially reduced actinomycetes, bacterial, and fungal counts at the bottom depth but increased actinomycete counts in subsequent samplings. Furthermore, SCB BC B1 in the second sampling, exhibited significantly higher metabolic quotient compared to all treatments with biochar. Additionally, there were no significant differences in Shannon, Evenness, and Equitability indices among treatments. However, a statistical variation was observed in the operational taxonomic units (OTU) values across different treatments, with a range extending from 3178 in SCB B2 to 3524 in CB B2. SCB BC also increased the abundance of beneficial microbial species such as Nitrosovibrio tenuis and Methyloversatilis universalis, which play crucial roles in nitrogen and carbon cycles. Also, no emissions of greenhouse gases, viz. CO2, N2O, and CH4, were detected in SCB treatments, both with and without biochar, whereas emissions were observed in H and CB treatments. Integrating the smart capillary barrier with biochar shows promise for sustainable agriculture in Oman by improving nutrient availability, conserving soil moisture, enhancing microbial communities, and mitigating climate change impacts.