A systematic study was conducted to investigate the permeability, porosity, grain size, water content, mass percentage of carbonate, and magnetic susceptibility of representative Middle Pleistocene loess-palaeosol layers (from L1 to S5) on the Chinese Loess Plateau. The average infiltration rate of the loess (0.93 mm/min) was higher than the palaeosol (0.62 mm/min), and the porosity of loess was higher than that of palaeosol. The loess layers have greater water-bearing capacity and, therefore, they are more likely to form aquifers while the palaeosol layers are more prone to form aquitards. The greater permeability and the larger water-bearing space of the loess layers are largely the result of lower intensity pedogenesis due to the colder/drier climatic conditions at the time these sediments were deposited. Conversely, the weaker permeability and lesser water-bearing capacity of the palaeosol layers can be explained by the greater pedogenesis during the warmer/wetter climatic conditions. The studies demonstrate a compelling relationship between Pleistocene climate and modern hydrological systems in the southern Chinese Loess Plateau.