The lower Himalayan regions of north‐west India experienced a severe land‐use change in the recent past. A study was thus conducted to assess the effect of grassland, forest, agricultural and eroded land uses on soil aggregation, bulk density, pore size distribution and water retention and transmission characteristics. The soil samples were analysed for aggregate stability by shaking under water and water drop stability by using single simulated raindrop technique. The water‐stable aggregates (WSA) >2 mm were highest (17·3 per cent) in the surface layers of grassland, whereas the micro‐aggregates (WSA < 0·25 mm) were highest in eroded soils. The water drop stability followed the similar trend. It decreased with the increase in aggregate size. Being lowest in eroded soils, the soil organic carbon also showed an adverse effect of past land‐use change. The bulk density was highest in eroded lands, being significantly higher for the individual aggregates than that of the bulk soils. The macroporosity (>150 µm) of eroded soils was significantly (p < 0·05) lower than that of grassland and forest soils. The grassland soils retained the highest amount of water. Significant (p < 0·05) effects of land use, soil depth and their interaction were observed in water retention at different soil water suctions. Eroded soils had significantly (p < 0·05) lower water retention than grassland and forest soils. The saturated hydraulic conductivity and maximum water‐holding capacity of eroded soils were sufficiently lower than those of forest and grassland soils. These indicated a degradation of soil physical attributes due to the conversion of natural ecosystems to farming system and increased erosion hazards in the lower Himalayan region of north‐west India. Copyright © 2013 John Wiley & Sons, Ltd.