New management systems are needed that enhance the sustainability of crop residue harvesting for use as feedstock in the emerging biofuel industry. We investigated whether a novel perennial cover crop management system, designed to overcome yield drag, would enhance sustainability of maize (Zea mays L.) residue harvesting. Overall the perennial cover crop treatments (Kentucky bluegrass (Poa pratensis L.) (BG) and creeping red fescue (Festuca rubra L.) (RF)) increased the soil potential mineralizable N (8.5 %), decreased the loss of total soil organic C (10.1 %) and N (6.5 %) relative to the no-cover crop controls (with (RR) and without (RS) removal of crop residues). Respired CO2, measured during 28 day incubations, decreased in the following order: RF>RS≈BG>RR for both in-row and in-between-row samples implying high microbial activity under cover crop treatments. SPAD readings, growth stage, and end of season maize-stalk nitrate test results varied by site-year but were consistent with soil NH4+/NO3- dynamics. Results indicate that competition between the maize and perennial cover crops for water and N resources was weather dependent. Although previous research documented that the management system employed was able to overcome the yield drag associated with perennial cover crops, in our study maize yields for the perennial cover crop treatments were only one third the yields for the controls. Overall, we conclude that the perennial cover crop system is capable of enhancing the sustainability of maize residue harvesting, but more work is needed to overcome the yield drag which may be caused by perennial cover crops under some conditions.