Studying soil water dynamics and water balance on coral islands is important to utilize and manage the limited freshwater resources of these islands. In this study, we investigated the soil water dynamics of Zhaoshu Island, Xisha Archipelago, using observed data and the Richards equation and analyzed the water balance of this island from October 2018 to September 2019. The precipitation, the water change values in the entire flow domain (△Volume), the bottom boundary flux (vBot), transpiration (Er), and evaporation (Es) during the entire observed year were 913 mm, 10 mm, 349 mm, 203 mm, and 351 mm, respectively. Precipitation is the only source of the freshwater, while approximately 38% of the precipitation infiltrated into the groundwater, 22% of the precipitation was taken up by vegetation, and 39% of the precipitation evaporated from the land surface. From November 2018 to April 2019 (dry season), there was a dry soil layer at depths between 40 cm and 160 cm in the soil profile. Evapotranspiration (ETa) was only 44 mm/month, which was 94% greater than the amount of precipitation, and approximately 14 mm/month of water was taken up from the groundwater by plants. However, in wet season, infiltration dominated the processes of soil water movement. Approximately 56% of the precipitation infiltrated into the groundwater and 37% of the precipitation was consumed by ETa. This study can help us to better understand the process of water movement on coral islands and provide references for further management to protect coral island ecology.