Organic milk production has been one of the fastest growing segments of organic agriculture in the United States in recent years. Despite the growing number of organic dairy operations, the characteristics of organic dairy operations and the relative costs of organic and conventional milk production have been difficult to analyze. This study, using 2005 ARMS data for U.S. dairy operations, which include a targeted sample of organic milk producers, examines the structure, costs, and challenges of organic milk production. The analysis addresses economies of size, regional differences, and pasture use in organic milk production and compares organic and conventional milk production costs. The findings suggest that economic forces have made organic operations more like conventional operations and that the future structure of the industry may depend on the interpretation and implementation of new organic pasture rules.