On a typical dairy farm today, large amounts of N are imported as feed supplements and fertilizer. If this N is not recycled through crop growth, it can lead to large losses to the atmosphere and ground water. More efficient use of protein feed supplements can potentially reduce the import of N in feeds, excretion of N in manure, and losses to the environment. A simulation study with a dairy farm model (DAFOSYM) illustrated that more efficient feeding and use of protein supplements increased farm profit and reduced N loss from the farm. Compared to soybean meal as the sole protein supplement, use of soybean meal along with a less rumen degradable protein feed reduced volatile N loss by 13 to 34 kg/ha of cropland with a small reduction in N leaching loss (about 1 kg/ha). Using the more expensive but less degradable protein supplement along with soybean meal improved net return by $46 to $69/cow per year, dependent on other management strategies of the farm. Environmental and economic benefits from more efficient supplementation of protein were generally greater with more animals per unit of land, higher milk production, more sandy soils, or a daily manure hauling strategy. Relatively less benefit was obtained when either alfalfa or corn silage was the sole forage on the farm or when relatively high amounts of forage were used in animal rations.