Irrigation with blended drainage water can damage soil structure, impair infiltration, and increase runoff and erosion. This loss of permeability is often attributed to the slaking of aggregrates and clay dispersion, which leads to pore plugging. Soil swelling is usually considered an important factor only when exchangeable sodium percentages (ESP) exceed 15%. We hypothesized that swelling is more important than generally recognized in reducing soil hydraulic conductivity (HC), and swelling can occur at low ESP. In this study we attempted to identify the mechanisms reducing HC and the reversibility of the processes during gypsum and sulfuric acid application. Synthetic drainage waters with sodium adsorption ratios (SAR) of 1, 3, 5, and 8 and electrolyte concentrations (C) of 0, 2.5, 5, 10, 25, 50, and 100 mmolc L−1, were leached through machine-packed soil columns to evaluate the effects of clay dispersion and swelling on HC. Following the initial leachings, the soils were amended with surface applied gypsum and H2SO4, and leached with deionized water. Clay concentration in the leachate was used as a measure of clay dispersion, and internal soil swelling was assumed to be proportional to changes in the water holding capacity at −22 kPa tension. Internal soil swelling at low electrolyte concentrations (<12 mmolc L−1) reduced the number of large, free-draining pores and increased the water holding capacity of the soil at low tension. This loss in HC, which occurred at all SAR, was largely reversible with surface-applied gypsum. At SAR 5 and 8, there was irreversible plugging of soil pores by dispersed clay, as well as internal swelling. These findings suggest that even diluted drainage waters used for irrigation will have an adverse effect on soil structure, especially during rainfall.