<p>Soils in the Pearl River Basin, China, are prone to compaction, significantly limiting nutrient uptake and posing challenges to agricultural productivity. This study aims to assess the efficacy of <i>Paulownia</i> biochar in improving soil structure, nutrient availability, and the yield of <i>Lycium chinense</i> Mill, particularly in the context of reduced fertilizer application. A two-year field trial was conducted on fluvo-aquic soils, with biochar applied at 0, 6, 12, and 24 t ha⁻¹, combined with 75% or 50% of conventional fertilization (CF: 375&#xa0;kg&#xa0;ha^–1). The study evaluated the effects on capillary porosity, field capacity, macro-aggregates, organic carbon, nitrogen use efficiency (NUE), and crop yield. Biochar applications at 12–24 t ha⁻¹ significantly improved soil properties, including capillary porosity (20.4–26.2%), field capacity (9.2–13.5%), macro-aggregates (28.1–37.5%), and organic carbon content (95.5–98.3%) in the first year. These improvements persisted into the second year, with increases of 20.1–23.8%, 10.0–18.9%, 30.8–50.6%, and 89.0–96.0%, respectively. Applying 24 t ha⁻¹ biochar with reduced fertilization notably increased soil ammonium nitrogen (NH₄⁺-N) and nitrate nitrogen (NO₃⁻-N) levels, resulting in improved NUE by 10.3–12.7% (T6) and 13.9–24.3% (T9). Consequently, crop yield increased by 9.3–12.7% (T6) and 0.1–10.6% (T9) compared to CF. The primary factors influencing yield were NO₃⁻-N levels, macro-aggregates, and capillary porosity. Biochar for partial replacement of fertilizers mitigated soil compaction, enhanced macro-aggregate formation, and improved nitrogen uptake, leading to increased crop yields. These findings suggest that biochar effectively enhances soil fertility and agricultural productivity while providing environmental benefits through reduced fertilizer use.</p>