Biochar has been proven to influence soil hydro-physical properties, as well as the abundance and diversity of microbial communities. However, the relationship between the hydro-physical properties of soils and the diversity of microbial communities is not well studied in the context of biochar application. The soil analyzed in this study was collected from an ongoing field experiment (2019–2024) with six treatments and three replications each of biochar (B1 = 25 t·ha−1 and B0 = no biochar) and nitrogen fertilizer (N1 = 160, N2 = 120 kg·ha−1, and N0 = no fertilizer). The results show that biochar treatments (B1N0, B1N1, and B1N2) significantly improved the soil bulk density and total soil porosity at different depths. The B1N1 treatment substantially enhanced the volumetric water content (VMC) by 5–7% at −4 to −100 hPa suction at 5–10 cm depth. All three biochar treatments strengthened macropores by 33%, 37%, and 41%, respectively, at 5–10 cm depth and by 40%, 45%, and 54%, respectively, at 15–20 cm depth. However, biochar application significantly lowered hydraulic conductivity (HC) and enhanced carbon source utilization and soil indices at different hours. Additionally, a positive correlation was recorded among carbon sources, indices, and soil hydro-physical properties under biochar applications. We can summarize that biochar has the potential to improve soil hydro-physical properties and soil carbon source utilization; these changes tend to elevate fertility and the sustainability of Cambisol.