Spatial variability of soil drainage, topsoil phosphate retention (P-retention), and clay mineralogy were investigated in soils on a Manawatu river terrace developed from a mixture of loamy tephra, loess, and quartzo-feldspathic alluvial parent material. The cause of short-distance variation in soil drainage was investigated on an area of 60 ha from the Last Glacial river aggradation terrace (200–240 m a.s.l.). Three small window areas of 7.5 ha were then selected for grid sampling at 50-m centres within each of 3 map units with contrasting drainage class. Each of the window areas was found to contain 3–4 different drainage classes. Topsoil P-retention also varied (from 20 to 84%) within the window areas. We found a close relationship between soil drainage, P-retention, and clay mineralogy. Well-drained soils have high P-retention and the clay fraction contains 12–13% allophane. Poorly drained soils have low P-retention and the clay fraction has no allophane and contains mainly Kandite (Kaolinite and Halloysite). The short-distance variability in drainage is attributed to slight textural variations of the original alluvial parent material. This gives rise to the formation of different soil structures, which in turn influence the soil hydraulic conductivity and thence variable drainage properties, which influence the clay mineralogy and P-retention.