The first step in building a wood retaining wall is to carefully plan where the wall needs to be built. Most retaining walls are built on land that slopes, and the wood retaining wall is meant to be an attractive and strong support to keep the slope from sliding. The next step is to choose a design; different wood retaining wall designs offer pleasing aesthetics and strength, but some walls are more difficult to construct than others. Choose what your particular needs are, and find your design based on your needs as well as your carpentry skill level.
You will have to dig into the slope of the land in order to properly build the wood retaining wall. Dig in sections to avoid a large collapse of earth, and place the wood as you go. Be sure to choose the correct type of wood; any wood that is placed in the ground will need to be properly pressure treated to avoid rot and decay over time. Pressure-treated fir is a good choice, though cedar, which is naturally water-resistant and mold-resistant, is a better choice that will cost a bit more money.
The first layer of timbers that will comprise the wood retaining wall will be completely buried into the slope. After digging a trench along the span of the area where the wall will be built, wet the area and tamp down the soil. Place the timber and push it into place. The second piece of timber can be placed on top of that piece; if your wall is designed to turn a corner, place the board that will be the perpendicular wall next. Drill a hole through the two timbers, then force a metal rod through the two timbers to steady them into place. The second level of the first side can be placed next and secured in a similar fashion. The corner of the retaining wall will look similar to a wood cabin design, with overlapping timbers providing support at the corners.
Once the wall is built, backfill against the wall. This will involve shoveling the soil on the uphill part of the slope against the wall, as well as soil from the downhill side against the bottom base of the wall. Dampen the soil to encourage it to settle, and drill small holes every few feet along the length of the fence to allow moisture from rain and snow to escape the wall. This will prevent damage to or a complete collapse of the wall in the future.