Improving water and nutrient retention in desert croplands using soil organic amendments can be a major challenge because organic matter decomposes quickly under irrigated conditions in a hot climate. Biochar—a long-lasting carbon-rich soil organic amendment—has been proposed to improve soil water and nutrient retention, but only by carefully selecting an appropriate application rate. To better understand effects of biochar application rate on soil water and nutrient retention in desert croplands, we set up a mesocosm-scale experiment with biochar added at rates of 0, 19.8, 39.7, 79.4, 119.0, and 158.7 t ha−1 to an alkaline, sandy loam soil. After initial water retention measurements, we added fertilizer and then measured gaseous nitrogen losses as well as soil nitrate (NO3−) and phosphate (PO₄³⁻) leaching. Then, we measured biochar's effect on the soil's capacity to hold plant-available water (i.e., available water capacity, or AWC) using Tempe cells and a dewpoint potentiometer. We found contrasting effects of low and high biochar application rates. First, we found that applying a minimum of 79.4 t ha−1 biochar was necessary to improve soil water and PO₄³⁻ retention; application rates below 79.4 t ha−1 exacerbated PO₄³⁻ leaching whereas treatments above 79.4 t ha−1 improved AWC by up to 34% compared to the control treatment. While biochar application rate did not affect soil nitric oxide or ammonia emissions, we did find that low biochar application rates increased soil nitrous oxide emission while higher application rates reduced emission compared to soil with no biochar. Overall, we found that lower and higher rates of biochar application can have contrasting effects on soil water and nutrient retention in an alkaline, desert cropland soil. Therefore, farmers and other land managers must consider potential drawbacks of lower application rates and threshold responses of higher application rates prior to large-scale biochar use in arid agroecosystems.