Effects of earthworms on soil physico-hydraulic and chemical properties, herbage production and wheat growth in long-term arable soils following conversion to ley were investigated. Seven intact soil monoliths were collected from each of four arable fields. One monolith per field served as a control. The other six were defaunated by deep-freezing; three were left defaunated (DeF) and three (DeF+E) were repopulated with earthworms to mimic pasture field density and diversity. The monoliths were planted with a grass-clover ley and inserted into pre-established ley strips in their original fields for 12 months. Hydraulic conductivity measurements at −0.5 cm tension (K0.5) were taken five times over the year. K0.5 significantly increased in summer 2017 and spring 2018 and decreased in winter 2017–18. K0.5 was significantly greater (47%) for DeF+E than DeF monoliths. By the end of the experiment, pores >1 mm diameter made a significantly greater contribution to water flow in DeF+E (98%) than DeF (95%) monoliths. After only a year of arable to ley conversion, soil bulk density significantly decreased (by 6%), and organic matter (OM) content increased (by 29%) in the DeF treatments relative to the arable soil. Earthworms improved soil quality further. Compared to DeF monoliths, DeF+E monoliths had significantly increased water-holding capacity (by 9%), plant-available water (by 21%), OM content (by 9%), grass-clover shoot dry biomass (by 58%), water-stable aggregates >250 μm (by 15%) and total N (by 3.5%). In a wheat bioassay following the field experiment, significantly more biomass (20%) was produced on DeF+E than DeF monolith soil, likely due to the changed soil physico-hydraulic properties. Our results show that earthworms play a significant role in improvements to soil quality and functions brought about by arable to ley conversion, and that augmenting depleted earthworm populations can help the restoration of soil qualities adversely impacted by intensive agriculture.