AbstractAmendment application is one of the effective measures used to remediate structural problems in coarse‐textured soils. However, the application of water‐based spent drilling mud (WBSM) as a potential amendment and its associated impacts on physical and hydraulic soil properties is not well‐studied. This research aimed to investigate the effect of the application of WBSM on basic hydrophysical properties of coarse‐textured loessial soil sampled from the Loess Plateau, China. Application of WBSM to repacked loessial soil at four application rates (0, 25.0, 50.0, 75.0 g kg−1, dry basis), denoted as control (H0), low (HDL), medium (HDM) and high (HDH), respectively, was used to investigate changes in soil bulk density (ρb), soil total porosity (ƒ), saturated hydraulic conductivity (Ks), relative gas diffusivity (Dp/Do), soil‐water retention and soil evaporation characteristics. The results showed that the soil ρb in HDL and HDM decreased by 4.0% and 5.5%, respectively, as compared to H0 (p < 0.05). Measured Ks changed to 36.7% (HWL), 12.2% (HWM) and 4.4% (HWH) as compared to H0 (5.56 cm d−1). The application of WBSM further decreased the percentage of soil pore sizes >30 μm, but increased the proportion of medium pore sizes (≥30–50 μm), micro pore sizes (≥0.3–5 μm) and extremely micro pore sizes (<0.3 μm), which was attributed to the clogging effect of the fine and clay particles contained in WBSM. Decline in Dp/Do, however, was observed with increasing WBSM, likely due to the increased pore tortuosity in fine‐grained soil. The van Genuchten soil‐water retention model parameters differed largely across the WBSM application rates, with increased soil available water‐holding capacity by 50.9%, 65.9% and 64.1% in HDL, HDM and HWH, respectively, as compared to H0. However, WBSM application also increased soil available water‐holding capacity and reduced evaporative water loss, which has useful implications for the management of coarse‐textured soils with a distinct water deficit in fragile ecosystems. Widespread use of WBSM to amend coarse‐textured soils requires further studies to evaluate the effects of WBSM amendments in field trials and its environmental consequences.Highlights Water‐based spent drilling mud (WBSM) altered the texture of loessial soil. WBSM increased soil total porosity and changed pore size distribution. WBSM affected the characteristics of soil water and gas transport. The soil water availability was improved by WBSM application.