Implementing thinning practices can enhance the growth of plantation forests and improve soil health. Nevertheless, the impacts of thinning applications on soil quality, large-diameter timber production of Castanopsis hystrix, and ecosystem multifunctionality are poorly understood. Therefore, we chose two sample plots, unthinned (control) and thinned, to investigate productivity and ecosystem multifunctionality after thinning for six years. Results revealed that thinning significantly reduced the soil’s bulk density, enhanced large-diameter timber growth, and undermined ecosystem multifunctionality in the short term compared to control (unthinning) treatment. Compared to the control, the thinning treatment considerably enhanced the soil organic carbon (0–30 cm soil layer) and tree diameter at breast height (20–30 cm), and enhanced shrub leaf nitrogen (N), shrub root N, herb aboveground N, Gram-positive bacteria (0–10 cm soil layer), and Gram-positive bacteria (20–30 cm soil layer) contents by 29.61%, 65.29%, 44.61%, 274.35%, and 323.44%, respectively. Furthermore, the thinning application could improve the N and P resorption efficiency more than control. Furthermore, compared with control, thinning treatment maximized decomposition and nutrient cycling function by 11.81% and 143.40%, respectively. Moreover, total PLFA content significantly impacts carbon stocks, wood production, and water regulation functions. In conclusion, this study underscores the considerable potential of thinning in augmenting large-diameter timber production by stimulating the positive effects of forest stands. These findings provide valuable insights for ecosystem multifunctionality elevation and the judicious application of thinning to improve forestry productivity, facilitating sustainable development in the forestry sector.