Both positive and negative externalities are associated with grassland management, and huge differences in productivity and environmental impact prevail between species-rich extensive grasslands and input-intensive, frequently defoliated grass monocultures. Potentials for improving the eco-efficiency of grassland-based production systems through decisions regarding management intensity, nutrient management, grazing and forage conservation, and the use of temporary versus permanent grasslands are discussed at the plot and the farm scales. To do so, we carried out life cycle assessment studies and reviewed studies related to plant and animal diversity. Extensification is positive for farmland biodiversity but does not always imply an improvement of the product-related environmental performances with regard to air, soil and water or resource use. Besides management intensity, nutrient management emerges as the main lever to improve the environmental performances of grassland-based production. In contrast, forage conservation and the type of conservation procedure appear to be of minor importance, except for the effect on biodiversity. Compared to barn feeding, grazing showed strengths as well as weaknesses that varied by the scale at which the systems were compared. The effect of cultivating grass-clover temporary grasslands was mainly driven by the related modification in fertilization requirement.