Spatial variability in grain yield can arise from variation in many different soil and terrain properties. Identification of important sources of variation that bear significant relationship with grain yield can help achieve more effective site-specific management. This study had three aims: (i) a geostatistical description/modelling of the paddock-level spatial structure in variability of plant-available water capacity (PAWC) and related soil properties, (ii) to determine optimal number of management zones in the paddock, and (iii) to assess if the variability in PAWC and related soil properties is significantly associated with the variability in grain yield across the management zones. Particle size distribution, bulk density (BD), field capacity (FC), permanent wilting point (PWP), and soil water content (SWC) at sowing were measured at 4 soil depths (to 0.60 m) at 50 representative spatial sampling locations across a paddock near Birchip (Victoria). PAWC and plant-available water at sowing (PAWs) were derived from these data. Moderate to strong spatial dependence across the paddock was observed. The magnitude of the structural variation and of range varied widely across different soil properties and depths. The south-east edge and the central areas of the paddock had higher clay content, FC, PWP, PAWC, and lower PAWs. The paddock was divided into 6 potential management zones using combined header yield and normalised difference vegetation index (NDVI). The adequacy of zoning was evaluated using relative variability (RV) of header yield and soil properties. The mean RV for 3 zones differed little from that of 6 management zones for header yield and for each measured soil property, indicating division of the paddock into 3 zones to be adequate. The results from residual maximum likelihood (ReML) analysis showed that low yield zones had significantly higher clay content, FC, PWP, SWC, and PAWC and significantly lower PAWs than both medium and high yield zones. The mean FC, PWP, and PAWC in the low yield zones were, respectively, 25%, 26%, and 28% higher, and PAWs 36% lower than their corresponding values in the high yield zones. Linear regression analysis indicated that 59-96% of the observed variation in grain yield across management zones could be explained by variation in PWP. The practical implications of these results are discussed.