Agricultural production systems that also provide opportunities to conserve biodiversity will be a crucial component of integrated and sustainable land use in mixed farming landscapes and should be considered and evaluated. Alley farming is an innovative farming system that aims to increase farm profitability while also enhancing environmental outcomes. Alley farming incorporates belts of woody perennial plants such as trees or shrubs, interspersed with alleys of conventionally rotated cropping and livestock grazing land. In the present study, we assessed the impacts on terrestrial biodiversity of alley farming with the native perennial chenopod shrub old man saltbush (Atriplex nummularia Lindl.) in central western New South Wales. Terrestrial biodiversity conservation status was assessed by site surveys conducted in spring 2005, 2006 and 2007 at 15 old man salt bush alley farming sites (OMSB), 15 conventionally managed sites and three native woodland remnants in and around the Condobolin Agricultural Research and Advisory Station in the central western plains of New South Wales. Biodiversity surveys included an assessment of 'site condition' - a metric of biodiversity conservation status at the site scale based on measurement of 10 habitat and vegetation condition attributes, compared against benchmark values for the appropriate native ecosystems with relatively little recent anthropogenic modification. Bird surveys were also conducted to assess the diversity and abundance of irds in OMSB, conventional and remnant woodland sites in four functional response groups. Site condition was significantly higher at remnant woodland sites than at conventional farming and OMSB alley farming sites. Remnant woodland sites had greater native overstorey over and native ground cover of forbs, more trees with hollows, presence of at least some overstorey regeneration and the presence of fallen logs. Site condition was also significantly higher at OMSB sites than at conventional sites and increased significantly across 3 years. By the third year after establishment, OMSB sites had higher native plant species richness and native mid-storey cover than did conventionally farmed sites. These attributes increased markedly over time at the OMSB sites whereas they did not increase at conventional or remnant woodland sites. Native grasses and forbs established under and around the saltbush plants, indicating that OMSB alley plantings can provide habitat for a wide range of native plant species, enhancing biodiversity values of these areas through improved structure and composition. Improved habitat condition at the OMSB sites after 3 years did not lead to a significantly higher diversity or to a higher overall abundance of birds at the OMSB than at conventional sites. Furthermore, diversity and abundance of birds at both OMSB and conventional sites remained significantly below those of remnant woodland sites. Some decliner bird species were observed using OMSB sites, but not conventional sites. Old man saltbush alley farming can provide direct on-site benefits for native biodiversity by improving the structure, function and composition of vegetation at the site or paddock scale. If proposed as a replacement to conventional crop-pasture rotation, OMSB alley farming can enhance biodiversity conservation values, and where production benefits are likely, could play an important role in the integration of production and conservation as a synergistic 'win-win' system in mixed farming enterprises.