A modelling system is presented and used to analyse the effects of EU dairy policy reform (Agenda 2000 and milk quota abolition with and without decoupled direct income payments) on Dutch agriculture and economy. The modelling system consists of a regionalised, agri-environmental, partial equilibrium, mathematical programming model of agriculture supply in the Netherlands integrated into a mixed input-output model. It was e.g. found that decoupling of direct income payments gives an extra stimulus to milk production after milk quota abolition. However, the increase in milk production is restricted by nutrient and manure policies in the Netherlands. It is also found that, although the total effect on Dutch GDP is limited, the income effects for individual industries can be large. Moreover, economy wide effects for non-agricultural industries exceed changes for agriculture.