Leveling my yard?

I live in middle TN on top of a small hill. The land slopes off away from my house which makes my yard unlevel. It is not a terrible thing, but I would like it to be level if possible. From where I would like to "fence in" my yard up to my house is probably 1-2 feet drop in elevation if not more in some areas. How difficult and expensive will it be to build a retaining wall and build up my yard to level? What should be used: dirt, sand, sod? I am a complete novice, but would like to know what to expect and where to start.

The cost depends a lot on how many linear feet of retaining wall you need to build, and also what material you choose for the wall (not to mention whether you do it yourself or hire someone else to do it). Pressure treated lumber is the cheapest and easiest to do, but it won't last forever, so you'll need to replace it eventually. Landscaping blocks, concrete blocks, and stone are going to be more expensive (as well as more time consuming to install, plus more heavy lifting) but they'll last pretty much forever. Regardles of materials, as long as you've got the physical strength for the digging and to manage the stone/blocks if you go that route, it's not difficult to build a 1-2 ft wall, it's just the physical labor. The rules vary depending on where you live, but where I am, if the retaining wall is over 3 feet tall then you need to get permits to build it, and that's when you need to worry more about proper engineering, etc. If you google building retaining walls, there are numerous sites that give you explanations of how to do it with various materials, I'd definitely check out a few sites so you can see what you're getting into.

sullivan, i wouldn't level it. You probably have ideal drainage now. If you level the ground near your house you could have water problems. I have 6 1/2 acres of flat ground. The pasture gets some very wet areas during this time of the year. Plants do not like to sit for too long with wet feet. It sounds like it would really be beautiful with proper placements of plants where it possibly wouldn't "look" so sloped.
I agree with ecrane about the engineering for retaining walls. You have so many variables to deal with such as freeze/thaw, pressures from water soil saturation, drought, plant roots, the most important would be water erosion. The water will cut around your retaining walls and cause them to fail if you don't maintain them. I know there are cases where retaining walls are a must, but if they are not necessary i think you are asking for more problems and expense than it would be worth.

I'm a newbie, too and we've got a sloping yard, but leveling is not feasible so, I bought a book titled, "Sunset Hillside Gardening". It's loaded with photos of landscaping ideas, techniques, how-to's, etc. It may give you a different perspective on your slope. Also, like Len123 suggested, leveling may interfere with drainage.

When you build retaining walls, part of the process is putting drainage in behind them. If you do that properly then there's no problem. But if you leave out the drainage or don't do it properly, then you can have problems. My back yard is terraced, and the way it's set up each of the terraces is sloped slightly as you go down towards the retaining wall, then there are a series of drains just behind the retaining wall that the water can flow into and it's routed down to the bottom of the hill. Honestly though if my hill hadn't been so steep I probably would have left it alone, for something that's only a gentle slope or a couple feet drop I'm not sure it's worth all the effort to do the retaining walls (I actually have another big hill in my front yard which was slightly less steep than the backyard hill, and that one I left alone). I second the recommendation for the Sunset book, that's a great place to get some ideas.