In experiments conducted over a four-year period the effect of pasture type (Setaria sphacelata and a Brachiaria decumbens/Leucaena leucocephala mixture), management system (rotational grazing and cut and carry) and level of concentrate supplement (0, 4 and 6 kg fresh weight/cow per day) on milk production in smallholder dairy units was examined. All units were 1 ha in size and stocked with five Sahiwal X Friesian cows. Milk yields/ha were higher from rotational grazing and the brachiaria/leucaena pasture when compared with the cut and carry system and the setaria pasture respectively. In subsequent experiments smallholder units were based on brachiaria/leucaena and rotational grazing. A supplement of 4 kg fresh weight of concentrate (11 MJ/kg DM and 150 g/kg DM CP) increased milk yield/ha from 7,760 to 13,045 kg while in a third trial milk yield/ha was further increased from 14,148 to 16,760 kg when concentrate level was raised from 4 to 6 kg fresh weight/day. The results indicate that smallholder dairy units in Malaysia could be economically viable and competitive with other agricultural enterprises such as rubber and oil palm.