Dual-purpose cereal cropping is gaining acceptance among growers in mixed farming systems. Success in particular seasons depends on management decisions regarding choice of cereal species, sowing date, timing of grazing, and stocking rate. A more detailed understanding of how these factors influence the growth, phenology, and grain yield of the major cereal forages is needed to model these systems. Wheat (cvv. Whistler and Mackellar) and oats (cv. Blackbutt) were grown under dual-purpose management near Canberra, ACT, over 3 years (2004–06) in 2 crop sequences: wheat-oats-wheat and oats-wheat-wheat. In each year, crops were grazed by sheep at low (20/ha), medium (30–35 /ha), and high (40–52 /ha) grazing intensities. In the pre-grazing periods, measurements of phyllochron interval (PI), tiller development rate (TDR), and stem apex height were made. Post-grazing growth rate was determined from shoot biomass cuts taken at the end of grazing and at grain harvest. Soil moisture changes during each year were monitored to examine the pattern of soil water use under varying grazing intensities. In unusually dry periods in March–April 2004 and 2005, oats established significantly denser plant populations than wheat. In 2004, this initial advantage of oats resulted in greater feed on offer at the start of grazing than wheat, whereas in 2005, higher TDR, lower PI of wheat, and the longer duration of tillering resulted in similar amounts of feed on offer at the start of grazing. Elongation of the stem apex was more rapid in wheat than oats, indicating that wheat would be more at risk of damage during grazing. The post-grazing growth rate of wheat and oats was significantly lower than the ungrazed control in the dry spring years of 2004 and 2006, but significantly higher in the wetter spring year of 2005. While reduction in growth rate at high stocking rate was most likely caused by extreme reduction in leaf area, the causes of increases in growth rate following more lenient grazing require further investigation. In 2004 and 2005, there was no significant difference between crops or between stocking rate treatments in soil water depletion during the post-grazing period. However, in 2006, when soil moisture was not affected by rainfall in the post-grazing period, significantly more water was depleted from soil in the 0.60–1.70 m depth under low and medium stocking rate treatments than under the ungrazed control treatment. A gross margin analysis showed greater economic returns for the dual-purpose compared with a grain-only option in each year, most notably in the very dry season in 2006, when conventional practice would have been to sacrifice the grain crop to grazing or hay production.