Land-use intensification requires more farm inputs to sustain or increase farm product outputs. However, a common concern for land-use intensification is the potential deterioration of soil. The North Otago Rolling Downlands (NORD) region of New Zealand is drought prone, and although traditionally limited to extensive sheep farming, there are large-scale conversions to intensive cattle grazing operations such as dairy farming resulting from an irrigation scheme commissioned in 2006. Pallic soils (Aeric Fragiaqualf in US Soil Taxonomy) such as those in the NORD region are prone to soil compaction because of their ‘high’ structural vulnerability under intensive management. To address these concerns, a field trial was established on a common NORD Pallic soil (Timaru silt loam) to determine how land-use intensification affects indicators of soil quality (macroporosity, bulk density, structural condition score, total and mineralizable carbon and nitrogen and earthworms) and pasture production. The treatments compare irrigated v. dryland pasture and sheep v. cattle grazing on 16 plots. The findings show that soil physical quality responds more quickly to changes in land-use pressure than do biochemical and organic indicators. Both irrigation and cattle grazing, particularly in combination, increased soil compaction; macroporosity on irrigated plots grazed by cattle ranged from 9·1 to 13·3% v/v at a depth of 0–50 mm, compared to dryland plots with sheep grazing (18·9–23·0% v/v). Soil compaction/damage has implications for pasture production, soil hydrology and nutrient movement. Land management practices for intensive cattle grazing of irrigated soil prone to treading damage therefore need to implement high compaction risk strategies to avoid or ameliorate potential changes to soil quality.