Is it possible? Yes.
Is it a good idea? No. Sand washes away much, much to easily.
One way is to dig out a flat area, level it, and put the retaining wall against the existing dirt, where you dug out the flat area. You can used interlocking landscaping blocks and fill behind them with some of the dirt removed. (See Lowes link below).
Another way is to use the landscaping blocks on the low side, and fill with 'crusher run' (mixed size gravel) very much like you imaged with sand.
Lowes retaining wall blocks
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