Losses in net primary production from soil degradation caused by agricultural land use is a serious and growing problem worldwide. Restoring degraded soils is crucial to stop the expanding footprint of land degradation and feed our growing human population. To return degraded and desertified landscapes to productivity, sandy soils must first be improved to enhance water and nutrient holding capacity. We used greenhouse experiments to examine the impact of incorporated coarse woodchips on water and nitrogen (N) cycling as well as biomass production in very sandy, degraded soils. Coarse woodchips incorporated into the soil increased soil water content by 350% and available water capacity by 185%. With woodchip amendments, soluble N losses were reduced by 90% under un-fertilized conditions but no significant differences were observed when fertilized. Biomass production was reduced by 60% when soils were amended with woodchips. More work is needed to examine the mechanisms behind the decrease in biomass production and to determine if the short-term effects of woodchip incorporation seen in this study are indicative of longer-term trends. These findings suggest that incorporating coarse wood chips into degraded soil increases soil water holding capacity and may provide a basis for enhancing some ecosystem processes.