Soil compaction after initial soil tillage for crop establishment has been a major problem in crop fields because of its deleterious effects on soil functioning and crop performance. Therefore, the study aimed to determine the degree of compaction, soil air capacity, near-surface optimum ratios, and water retention characteristics in a sandy loam. Dystrophic Paleudalf initially under different tillage methods for sugarcane crop but without tillage for two seasons in southern Brazil. Initial soil tillage systems consisted of no-tillage (NT), compacted no-tillage (NTC), conventional tillage, and chiseling of no-tillage (Ch). Disturbed and undisturbed soil was sampled from 0 to 10, 10 to 20, 20 to 40, and 40 to 60 cm layers to determine degree of compaction, air capacity, near-surface optimum ratios, soil water retention characteristics, and soil physical quality index S. Initially, NT treatment had the significantly (p < 0.05) lowest degree of compaction (87%), highest soil air capacity (0.104 cm³ cm⁻³), air capacity/total porosity ratio (0.261), and better water retention characteristics in the surface layer. Over time, Ch had improved the structure of the subsurface soil layers with the lowest degree of compaction (≈88%) and highest air capacity (≈0.140 cm³ cm⁻³), while the measured indices were poor in NTC. Irrespective of tillage, the surface layer showed resilience during the years without soil disturbance with low degree of compaction, increased water retention, and air capacity. NT could be a good soil management option for sugarcane production, while mechanical chiseling is advocated for ameliorating compacted soils.