Technical Abstract: Escalating fertilizer and feed costs, declining product prices, and increasing regulations to reduce nutrient loss have created new pressures to improve nutrient use in agricultural production. Of particular importance is N use efficiency (the percentage of applied N incorporated into a product), because of high N use, and the great potential of N to increase production and pollute the environment. The purpose of this study is to provide an overview of factors and processes that impact N use efficiency (NUE) in dairy production, evaluate gaps between NUE obtained on commercial farms (actual-NUE) and under experimental conditions (potential-NUE), identify practices that may bridge these gaps, and evaluate the possibility of using NUE as a performance indicator for dairy farm performance. In general, feed-NUE (feed N transformed into milk) is higher on confinement- (21 to 36%) than on grazing- (16 to 25%) based farms; manure/fertilizer-NUE (manure N and fertilizer N incorporated into crops and pasture) varies greatly (16 to 77%) and is very site-specific; and whole-farm NUE (8 to 64%) declines as stocking rates increase, which increases reliance on imported feed and limits possibilities for effective manure N recycling. Actual-NUEs are lower and much more variable than potential-NUE which indicates significant improvements in NUE are attainable on many commercial dairy farms. Optimal stocking rate and manure N crediting can enhance NUE, farm profits and environmental outcomes of dairy farms. Concepts of NUE could be used to engage dairy producers in collaborative assessments of gaps between their actual N use and the biological potential of N use, to develop performance goals for N use in various production components, and to monitor and evaluate the impacts of alternative feed, manure and fertilizer management practices on N use, profitability, and environmental outcomes.