Biochar has been evaluated globally to improve soil fertility and mitigate climate change. However, the long-term effects of successive biochar application on carbon (C) accumulation in soil irrigated with saline versus non-saline water (canal water) has not been investigated. A field experiment was conducted to study the effects of rice straw biochar addition rates (0, 2, 4, 8 Mg ha−1) on C storage in soil irrigated with water of different electrical conductivity [EC, dS m−1]; 0.3 (non-saline canal irrigation water; CIW), 5 (saline irrigation water; SIW5), 10 (SIW10), and 15 (SIW15) in a cotton-wheat system. Long-term irrigation with saline water of variable EC levels adversely affected soil functions, reducing above-ground biomass in cotton (12–48%) and wheat (5–27%). In contrast, plots irrigated with saline water but amended with rice straw biochar showed significant improvement in aboveground biomass (both in cotton and wheat), possibly due to its beneficial effects on soil properties such as soil EC, organic carbon, microbial population, water and nutrient availability, bulk density, soil aggregation, and proliferation of roots. Interestingly, the change in total organic C (TOC) stocks (8.5, 17, and 27.5 Mg C ha−1) after 5 years were found to be almost double the amount of biochar C added (4.3, 8.6, 17.2 Mg ha−1), indicating stabilization of belowground C inputs from the root biomass by the applied biochar and also possibly through its physical interaction with aggregates and minerals. Even though biochar application to saline water irrigated plots increased the contribution of plant-derived C to overall soil TOC stocks, it was still lower compared with canal water irrigated plots. The study conclusively established that the long-term stabilization of biogenic C through biochar has essential implications for mitigating climate change by accumulating additional C beyond the recalcitrant C contained in biochar.