Soil hydraulic properties determine water transport, distribution and storage in soils, thus affect ecosystem functioning. Soil water retention parameters, such as saturation water content (SAT), water drained upper limit (DUL) and lower limit (DLL), characterize soil water-holding capacity, thus are important for plant growth and carbon and nutrient cycling in grassland ecosystem. However, we are still unclear to what a content these soil water retention parameters may regulate plant production and soil organic matter content in natural ecosystems in semi-arid grassland environment. We investigated plant species richness (SR) and aboveground biomass (AGB), soil organic carbon (SOC) and nitrogen (SON) contents, and soil water retention and other physical parameters in the steppe ecosystems along a climate transect, which spans the desert steppe, typical steppe and meadow steppe zones in Northern China. We analyzed the relative importance of climate factors, soil water retention parameters and other soil physical parameters in regulating plant AGB and SOC and SON contents using partial correlation analysis, and quantified the contribution of each separate and combined climate and soil physical parameters in predicting plant AGB and SOC and SON contents using geographic detectors method. We found that (i) plant SR and AGB, soil SAT and DUL, and SOC and SON are all significantly inter-correlated, and increased with the increase of climate humidity. (ii) Climate, but not soil physical parameters, was the most preponderant factor in predicting plant SR and AGB. (iii) Soil physical parameters were more important than climate parameters in regulating soil organic matter content; soil DUL was the best predictor to SOC content. Our results suggest that soil water retention parameters especially soil DUL, may play a greater role than climate factors in modulating SOC content, though climate is more predominant in regulating plant SR and production. Our results imply that we need to be cautious in estimating SOC content based on climate factors and vegetation biomass or remotely-sensed vegetation indices, and that soil physical properties need also to be incorporated along with vegetation parameters for improving SOC estimation at a regional scale.