Technical Abstract: Milk is produced in a continuum of dairy systems from full confinement to full pasture grazing. Climate, available feeds, and milk price: feed cost ratio influence the preferred system. All dairy systems have an environmental impact and inputs to maximise profit may lead to pollution levels unacceptable to society. There is vigorous debate concerning the trade-off between dairy farm profit and air and water quality impacts. Reasoned debate requires good information on the key production, economic and environmental parameters associated with different dairy systems and an agreement on the boundaries of each system. We provide a summary of literature on experiments and modelling of confinement and pasture-based dairy systems as a framework for future analysis and debate. There are few published experimental comparisons of confinement and pasture-based systems that account for both production and environmental parameters, so we make extensive use of modelling studies (e.g. life cycle assessment, Integrated Farm System Model, DairyNZ Whole Farm Model and OVERSEER). Where possible we use experimental data to evaluate model predictions. We compare a subset of possible dairy systems for both economic and environmental performance and identify areas of high sensitivity to factors such as input costs or environmental pollutants. Strengths and weaknesses of different systems are identified and we highlight opportunities for economic and environmental improvements by both component technologies and system redesign. Stored feed systems need to reduce their production costs and environmental footprint. Pasture-based systems need to reach the energy intake levels associated with TMR, and reduce the nitrate and N2O losses associated with urine patches in grazed pasture. Dairy systems research must ensure that advances in animal and plant breeding lead to simultaneous economic and environmental benefits.