Field experiments were conducted at the Indian Agricultural Research Institute, New Delhi, India for 3 years (2001-2002 to 2003-2004) to study the effect of crop diversification and residue incorporation on sustainability of a rice-wheat cropping system that is no longer sustainable as indicated by declining productivity and soil fertility, depleting groundwater reserves, and emergence of new weed species. The present study indicates that rice-potato-mungbean cropping system was sustainable, compared with a rice-wheat cropping system, in terms of higher productivity, protein yield, and energy output. A rice-rapeseed-mungbean cropping system was also significantly superior to a rice-wheat cropping system in respect to productivity and protein yield. Soil indicators such as available phosphorus (P), populations of fungi and actinomycetes, microbial biomass, and CO2 evolution were also better for the rice-potato-mungbean cropping system and the rice-rapeseed-mungbean cropping system than in the rice-wheat cropping system. Incorporation of crop residue increased the productivity, protein yield, energy output, soil organic carbon (C), soil kjeldahl nitrogen (N), Olsen's P, neutral 1 N NH4OAC extractable potassium (K), population of bacteria, fungi, actinomycetes, microbial biomass, and CO2 evolution in soil and thus made the system more sustainable. The rice-potato-mungbean cropping system along with residue incorporation was the best and is recommended for sustainability of the system and soil as an alternative to a rice-wheat cropping system.