Calliandra calothyrsus Meissner (Calliandra) is a shrub that grows up to 12 metres in height and has been promoted in Uganda since 1987. The overall objective of the study was to determine the current socio-economic and farmers’ perceived environmental impacts of Calliandra at the plot, household and community levels. The specific objectives were to determine the primary reasons for planting and the primary benefits derived from Calliandra; to assess the costs, returns, and economic impact of Calliandra use as fodder; and to establish farmers' own perceptions of the economic and environmental impacts of Calliandra. A questionnaire was administered to 93 households to determine the reason for planting and the benefits from Calliandra. The economic profitability of planting Calliandra was assessed, and the incremental cost and benefits in milk production estimated. Data were collected on nine nurseries while on labour recall and observation methods were used. Farmers' workshops were held in each of the study districts to determine farmers' perceptions of the environmental impacts. The various purposes for which Calliandra has been promoted and initially planted are not the same as the primary or most important benefit derived by the farmers. Forty two per cent of the farmers in Kabale initially planted the shrub for soil fertility improvement; however, the most important benefit considered by 44% of the farmers to be the most important was fodder. Partial budgets economic analysis showed that in the case of supplementation of Calliandra a net present value (NPV) of US $ 140.50 to 182.26 and a net benefit per year after the first year of US $ 71.86 to 93.16 were realised per cow. For the substitution scenario of dairy meal with Calliandra, a higher NPV of US $ 206.04 to 245.44, and a net benefit per year after the first year of US $ 103.26 to 112.22, were realised per cow. Sensitivity analysis showed that extra milk production of two litres per animal per day would give the highest positive percentage change in NPV and annualised net benefit of 55% and 59% respectively. In Kabale only 10.7% of the farmers had experienced negative effects of Calliandra and in Mukono they were 4.3%. However, the quantification of biophysical impacts of Calliandra on soil erosion and crop yields would require long term experiments that were not in the scope of this study.