Some intensive agricultural practices result in soil degradation through loss of soil organic matter. Organic farming may mitigate this problem, if managed properly, but may result in a yield penalty compared with conventional systems. Biochar addition to soil could influence both agricultural systems, but previous studies are not definitive about its impact on soil processes. Sandy soils are more susceptible to the effects of reduced soil organic matter on soil hydrology and nutrient dynamics. Nitrogen (N) is important for crop growth and soil water content can influence its transformation and cycling. This study explored the effect of biochar amendment on soil water retention and nitrification processes in soils under organic and conventional management. Carbon dioxide evolution was used as an indicator of related microbial activity. A water release curve study and a 60-day incubation experiment were set up to consider the effect of biochar application on organically and conventionally managed sandy loam soils. The results showed that addition of biochar increased water retention for both soils and this is attributed to its porous structure. On incubation of an organically managed soil, with green-waste compost, initial ammonium level was small, reflecting microbial demand for N. The large cation exchange capacity of the organically managed soil retained ammonium, reducing availability for nitrification. Carbon dioxide evolution increased with continuing small contents of ammonium and nitrate when biochar was added to the organically managed soil. Biochar enhanced nitrification without increased respiration during incubation of a conventionally managed soil with added mineral N; a possible explanation for this enhancement is the increase in pH resulting from the biochar addition.