In the densely populated mixed farming areas of western Ethiopia, the integration of forages with food crops may be crucial to the achievement of sustainable crop and livestock production. This study investigated the effects of pure grass (Chloris gayana), legumes (Stylosanthes hamata, Desmodium intortum and Macrotyloma axillare) and grass/legume mixtures of the same species undersown in maize, on maize grain yields, fodder yields and soil parameters. The forages were undersown six weeks after planting the maize. After harvesting the maize, pastures were maintained as fodder crops for the subsequent two seasons. Maize, grown with and without fertiliser, and native grass fallow were control treatments. In the year of establishment, the undersown forages increased (p < 0.001) total fodder production without depressing (p < 0.05) maize grain yield. During the following two improved fallow years, the cultivated forages produced much higher (p < 0.05) DM yields than the traditional fallow. Amongst the improved fallows, the average forage DM yield was highest on C. gayana and the grass legume mixtures than on the pure legume stands (p < 0.05). During year four only D. intortum and S. hamata treatments produced maize grain and residue yields comparable to moderately fertilised maize (p < 0.05). Maize grain and stover yields from the other fallows and unfertilised maize treatments were lower (p < 0.05) than that of fertilized maize. Integrating D. intortum and its grass legume mixture and S. hamata as improved fallow, maximised the overall nett return compared to pure maize with or without fertiliser and the traditional fallow.