Global livestock productions in general and the dairy value chain in particular are at the crossroads of improving productivity and reducing environmental footprints to meet the growing demand for livestock products under a changing climate condition. Smallholder dairy farms must undergo a profound transformation in order to increase productivity, mitigate or reduce greenhouse gas emissions, and contribute to food security. The overall objectives of this study were to investigate the economic and environmental benefits of climate-smart dairy farming systems, with particular emphasis on smallholder dairy farms in the Salale milk belt, central Ethiopia. The present study adopts a mixed research design with data from household surveys, key informant interviews, focus group discussions, livestock activity, and biological data. The econometrics model, lifecycle assessment, and IPCC Tier II prediction models were employed for analysis. The result showed that resource constraints, supply chain bottlenecks and market linkages, inadequate services, and a scarcity of information on dairy management have been reported as hindering improved dairy technology adoption and implementation in the study area. The adoption of a few or the integrated package of improved practices had a significant impact on farmers’ food security. Similarly, the overall average carbon footprints of milk production were
1.91 and 2.35 kg CO2e/kg fat and protein-corrected milk (FPCM) (IPCC (2007) and IPCC (2014) GWPs), respectively, and the estimated carbon footprints have shown significant variation across farming systems. Interventions that overcome the constraints related to access to farm resources and the supply chain for IDF practice inputs, services, and output markets could facilitate the uptake of dairy technologies. Improving feed digestibility and feed efficiency by increasing the proportion of concentrate and improved forage, as well as chemically upgrading straw and crop residue, could provide an opportunity to both increase milk yield and reduce the CF of milk production in the study area. Our findings concluded that using improved dairy farming practices would increase animal productivity, reduce GHG emissions, and enhance farmers’ food security, thereby contributing to the country’s suitable development goal.