Nitrogen (N) is invaluable for maintaining agricultural production, but its use, and particularly inefficient use, can lead to environmental losses. This paper reviews N use efficiency (NUE) and N surplus indicators for dairy production systems to assess their utility for optimising N use outcomes and minimising environmental N losses. Using case-study examples, we also assess realistic goals for these indicators and discuss key issues associated with their use. Published whole-farm NUE and whole-farm N surplus values ranged within 10–65% and 40–700 kg N ha–1 year–1 respectively. In a study of five catchments across New Zealand, whole-farm NUE was more strongly affected by catchment differences in soil and climatic conditions than by differences in management. In contrast, whole-farm N surplus differed both between- and within-catchments and was a good indicator of N losses to water. Realistic goals for both NUE and N surplus thus depend on the agro-climatic context of the dairy system and on its economic and environmental goals. Crop and animal NUE values can be valuable indicators for optimising fertiliser and feed use and minimising N losses. However, global or national whole-farm NUE values appear of limited value if the ultimate goal for setting targets is to reduce the environmental impact of N use; whole-farm level targets based on N surplus would be a more useful indicator for this purpose. Our review also reinforces the importance of standardising the variables that should be used to estimate NUE and N surplus values, to ensure equitable comparisons between different systems. Finally, NUE and N surplus targets should also be set in the context of other agro-environmental considerations.