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Current forest industries in south-western Australia are based on regrowth natural eucalypt forests and Pinus and Eucalyptus spp. plantations, and restricted to areas with >600 mm y(-1) annual rainfall. Dryland farming systems have been developed across 20 million ha in a zone with 300-600 mm y(-1) annual rainfall and a Mediterranean climate. This zone is beset with land degradation problems, such as salinity and wind erosion, and there has been considerable effort in the last three decades to develop reforestation options to stabilise the landscapes. Traditional forestry approaches using pulp wood or sawlog production in this zone have been limited by unfavourable economics driven by modest tree growth rates, large transport costs to processing and export facilities, and high labour costs. Given that salinity results from a disruption of the landscape water balance, reforestation has represented a major component in attempts to tackle the problem. Issues with reforestation include (1) obtaining sufficient scale of activity to impact watershed water balances, (2) obtaining a hydrological response without displacing farm production and rural communities and (3) gaining payment for non-forest benefits. This paper reviews the approaches that have been used to integrate trees into the dryland farming (300-600 mm y(-1) annual rainfall) systems of south-western Australia, and have resulted in at least 113 286 ha of reforestation. These included both traditional (pine and eucalypt sawlogs) and new (sandalwood, biodiversity restoration and carbon mitigation through bioenergy and carbon sequestration) projects. Ongoing investment has centred on carbon sequestration as this represents one of the few profitable options for the management of dryland salinity in this region. Approaches developed in this region to encourage farmland reforestation will be applicable in other dryland regions, particularly with the interest in using the land-sector to meet climate mitigation targets.