The composition and functional properties of cow's milk are of considerable importance to the dairy farmer, manufacturer, and consumer. Broadly, there are 3 options for altering the composition and/or functional properties of milk: cow nutrition and management, cow genetics, and dairy manufacturing technologies. This review considers the effects of nutrition and management on the composition and production of milk fat and protein, and the relevance of these effects to the feeding systems used in the Australian dairy industry. Dairy cows on herbage-based diets derive fatty acids for milk fat synthesis from the diet/rumen microorganisms (400-450 g/kg), from adipose tissues (<100 g/kg), and from de novo synthesis in the mammary gland (about 500 g/kg). However, the relative contributions of these sources of fatty acids to milk fat production are highly dependent upon feed intake, diet composition, and stage of lactation. Feed intake, the amount of starch relative to fibre, the amount and composition of long chain fatty acids in the diet, and energy balance are particularly important. Significant differences in these factors exist between pasture-based dairy production systems and those based on total mixed ration, leading to differences in milk fat composition between the two. High intakes of starch are associated with higher levels of de novo synthesis of fat in the mammary gland, resulting in milk fat with a higher concentration of saturated fatty acids. In contrast, higher intakes of polyunsaturated fatty acids from pasture and/or lipid supplements result in higher concentrations of unsaturated fatty acids, particularly oleate, trans-vaccenate, and conjugated linoleic acid (CLA) in milk fat. A decline in milk fat concentration associated with increased feeding with starch-based concentrates can be attributed to changes in the ratios of lipogenic to glucogenic volatile fatty acids produced in the rumen. Milk fat depression, however, is likely the result of increased rates of production of long chain fatty acids containing a trans-10 double bond in the rumen, in particular trans-10 18:1 and trans-10-cis-12 18:2 in response to diets that contain a high concentration of polyunsaturated fatty acids and/or starch. Low rumen fluid pH can also be a factor. The concentration and composition of protein in milk are largely unresponsive to variation in nutrition and management. Exceptions to this are the effects of very low intakes of metabolisable energy (ME) and/or metabolisable protein (MP) on the concentration of total protein in milk, and the effects of feeding with supplements that contain organic Se on the concentration of Se, as selenoprotein, in milk. In general, the first limitation for the synthesis of milk protein in Australian dairy production systems is availability of ME since pasture usually provides an excess of MP. However, low concentrations of protein in milk produced in Queensland and Western Australia, associated with seasonal variations in the nutritional value of herbage, may be a response to low intakes of both ME and MP. Stage of lactation is important in determining milk protein concentration, but has little influence on protein composition. The exception to this is in very late lactation where stage of lactation and low ME intake can interact to reduce the casein fraction and increase the whey fraction in milk and, consequently, reduce the yield of cheese per unit of milk. Milk and dairy products could also provide significant amounts of Se, as selenoproteins, in human diets. Feeding organic Se supplements to dairy cows grazing pastures that are low in Se may also benefit cow health. Research into targetted feeding strategies that make use of feed supplements including oil seeds, vegetable and fish oils, and organic Se supplements would increase the management options available to dairy farmers for the production of milks that differ in their composition. Given appropriate market signals, milk could be produced with lower concentrations of fat or higher levels of unsaturated fats, including CLA, and/or high concentrations of selenoproteins. This has the potential to allow the farmer to find a higher value market for milk and improve the competitiveness of the dairy manufacturer by enabling better matching of the supply of dairy products to the demands of the market.