The effect of sole application of inorganic fertilizers (NPK) (N:P:K:: 30:26:25 kg ha−1) and combined application of farmyard manure (FYM) @ 4 Mg ha−1 and inorganic fertilizers (NPK + FYM) vis-a-vis non-application of fertilizers and manures (control) on changes in soil physical properties and plant growth characteristics of soybean (cv. JS 335) was studied in a deep Vertisol at the Indian Institute of Soil Science, Bhopal during the year 2001–2004. The results indicated that conjunctive use of recommended dose of fertilizer and farmyard manure (NPK + FYM) resulted in significant (P < 0.05) decrease of bulk density (9.3%), soil penetration resistance (42.6%) and increase in hydraulic conductivity (95.8%) and mean weight diameter of the water stable aggregates (13.8%) and soil organic carbon content (45.2%) compared to control. Among the aggregates, in macro-aggregate fraction (250–500 μm and 500–1000 μm size fraction) and in large macro-aggregate fraction (>2000 μm) maximum soil organic carbon concentration was recorded under NPK + FYM. The root mass of soybean was mostly (98%) confined to 15 cm soil depth. Combined application of NPK and FYM recorded significantly higher (P < 0.05) root length density and root mass density of soybean in the 0–15 cm soil layer at flowering stage over NPK (28 and 65%) and control (63 and 175%). The root length density of soybean was significantly negatively correlated with the penetration resistance (r = 0.98, P < 0.05). Application of FYM @ 4 Mg ha−1 with NPK significantly (P < 0.05) improved the biomass partitioning towards pod over NPK and control. The grain yield, water use efficiency and nitrogen use efficiency of soybean under NPK + FYM were significantly (P < 0.05) higher than NPK and control. The total above ground biomass and the leaf area index at R8 stage could account for respectively, 89 and 63% variation in grain yield of soybean. Therefore in every crop season, integrated use of farmyard manure at 4 Mg ha−1 and recommended dose of chemical fertilizers may be practised in Vertisols for improving soil physical environment and achieving higher soybean productivity through efficient utilization of water and nutrients.