Biochar application has been proposed as a promising strategy to improve soil functioning, defined as the integrated regulation of water storage, nutrient availability, and biological activity influencing crop productivity and crop performance in water-limited environments. However, its effectiveness depends on soil properties, climatic variability, and dominant processes. This study evaluated the effects of sewage sludge biochar on soil quality, water dynamics, nutrient availability, and bean productivity in sandy soil under rainfed semiarid conditions across two contrasting cropping cycles. A soil quality index (SQI) based on a minimum data set (MDS) derived from principal component analysis (PCA) was used to identify the dominant processes controlling soil functioning under different hydrological regimes. The two cropping cycles corresponded to wetter (Cycle I) and drier (Cycle II) hydrological conditions within the same agricultural year. Biochar application increased soil organic carbon and nitrogen stocks, enhanced phosphorus availability, and improved soil water storage. Despite similar evapotranspiration among treatments, water productivity increased, indicating more efficient conversion of stored soil water into yield. Biological indicators were more responsive during the wetter cycle, whereas physicochemical indicators dominated under drier conditions, revealing a shift in the processes regulating soil functioning. The minimum data set varied between cycles, demonstrating the environmental dependency of the SQI components. Overall, biochar improved soil resilience by enhancing nutrient retention and buffering crop response to water limitation, and the integrative SQI approach effectively captured these functional changes.