The purpose of this study was the investigation of sediment provenance and soil formation processes within a Mediterranean watershed (Koiliaris CZO in Greece) with particular emphasis on natural and manmade terraces. Material and methods Five sites (K1–K5) were excavated and analyzed for their pedology (profile description), geochemistry [including rare earth elements (REEs) and other trace elements], texture, and mineralogy along with chronological analysis (optical luminescence dating). The selected sites have the common characteristic of being flat terraces while the sites differed with regard to bedrock lithology, elevation, and land use. Results and discussion Three characteristic processes of soil genesis were identified: (1) sediments transportation from outcrops of metamorphic rocks and sedimentation at the fluvial sites (K1–K2), (2) in situ soil development in manmade terraces (K3, K4), and (3) strong eolian input and/or material transported by gravity from upslope at the mountainous site (K5). REE patterns verified the soil genesis processes while they revealed also soil development processes such as (a) calcite deposition (K1), (b) clay illuviation and strong weathering (K4), and (c) possibly fast oxidation/precipitation processes (K3). Carbon sequestration throughout the soil profile was high at manmade terraces at higher elevation compared to fluvial environments due to both climatic effects and possibly intensive anthropogenic impact. Conclusions Soils at Koiliaris CZO were rather young soils with limited evolution. The different soil age, land use, and climatic effect induced various soil genesis and soil development processes. The manmade terraces at higher elevation have much higher carbon sequestration compared to the anthropogenic impacted fluvial areas.