Abstract Soil hydrophobicity has increased in recent years due to the expansion of arid lands. In these lands soil inoculation with arbuscular mycorrhizal fungi (AMF) and application of biochar are two soil improvement strategies. The formation and stability of soil aggregates can be significantly influenced by these management practices. In the present study, the simultaneous effect of sugarcane biochar (0%, 1% and 2%) and AMF (+AMF and −AMF) on the improvement of water repellent (WR) and non‐water repellent (NWR) soil structure was investigated under corn cultivation in greenhouse. Incorporation of 2% biochar into NWR soil increased soil organic carbon by 155% and 94% in AMF and non‐AMF treatments, respectively, compared to the control (without biochar). However, this increase was less pronounced in WR soil. The difference in soil carbohydrate concentration between AMF and non‐AMF treatments enhanced with increasing biochar application level from 25% to 144% in non‐water repellent soil and from 51% to 147% in water repellent soil. The results indicated that the interaction between AMF and biochar had a significant positive effect on both soil microbial respiration and glomalin concentration. To measure the soil aggregate stability, the high‐energy soil moisture characteristic curve (HEMC) method was used. The positive effects of biochar and AMF on soil structural stability indices were observed in both studied soils. However, these positive effects were influenced by their interactive effects. Two percent biochar application in non‐water repellent soil, limited the positive effect of AMF on soil stability improvement by 73%. While, in water repellent soil, structural stability indices improved with 1% and 2% biochar application by 13.4% and 19.7% respectively, due to soil wettability improvement and consequently better microbial activities. Finally, in addition to the interactive effects of microbial activities and biochar on soil structural characteristics, the level of soil hydrophobicity is also effective in improving soil structure under these studies managements.