Pisonia grandis, now threatened, is an important source of soil organic matter on atoll islands and historically composed the dominant canopy of many atoll ecosystems across the Pacific. How the tree manages water to exist across wide precipitation gradients is poorly understood. This study tests the hypotheses that P. grandis is using organic‐rich soils that develop under their canopy and soil layering where organic soils contact carbonate sands as part of their water management strategy. We analysed the chemical and physical properties of soils from two atolls in the central Pacific Ocean, one wet (Palmyra, USA) and one dry (Nikumaroro, Kiribati). Additionally, we used HYDRUS‐1D to simulate vadose zone water dynamics under a range of organic cap thicknesses (0, 14, 30 and 50 cm), precipitation intensities (1, 5 and 10 cm/h) and average precipitation amounts (50, 100, 200 and 400 cm/yr). Laboratory results indicate organic soils are strongly, though not exclusively, associated with P. grandis. Water holding capacity increases with soil organic carbon up to about 10% but not beyond that amount. Modelling results indicate significant water retained in organic soils where they overlie coarse carbonate sediments suggesting a capillary barrier development as the plant‐mediated organic soil accumulates. Retained soil water extends modelled dry‐down times of root‐accessible soil by more than 3 weeks. This indicates that capillary barrier‐enhanced water availability can help explain how P. grandis and other soil‐building atoll species can exist across variable precipitation regimes. To our knowledge, this work is the first description of plant‐mediated capillary barrier development as a water management strategy.