To support a sustainable increase in agricultural productivity, the multipurpose legume Canavalia brasiliensis was integrated as forage and green manure into the smallholder crop-livestock system of the Nicaraguan hillsides. Through on-farm trials, surveys, and on-station experiments, we investigated the biophysical and socioeconomic tradeoffs in balancing livestock feeding with soil fertility management at the farm level, including farmers’ perception. Use as forage increased milk yields while use as green manure increased nutrient cycling efficiency. Short-term net annual income decreased when used as green manure and increased when used as forage. Management options to handle tradeoffs and maximize legume benefits are discussed.