Urea‐based fertilizers have replaced ammonium nitrate (AN) as the most common N source used in forage crops. However, urea‐based fertilizers are less efficient and result in greater N loss as ammonia. Environmentally Smart Nitrogen (ESN, Agrium Advanced Technologies) is a polymer‐coated urea‐N fertilizer that controls N release through temperature‐controlled diffusion. This study assessed the effect of different proportions of ESN and untreated urea (0, 50, 75, and 100% ESN with the balance as urea) on yield and nutritive quality of bermudagrass [Cynodon dactylon (L.) Pers.], as compared with conventional applications of AN and urea. The experimental design was a randomized complete‐block design with four replications on each of two sites and 3 yr (2010–2012). Nitrogen was applied at 336 kg ha−1 season−1, but was split over the season into two equal applications for the ESN treatments and four equal applications for the AN and urea conventional treatments. As the proportion of ESN increased, the amount of N lost through volatilization decreased. Relative to conventionally applied AN, the 50 and 75% ESN blends resulted in similar yields and 16.8% lower nitrate (NO3–N) levels in the harvested forage. Relative to conventionally applied urea, the 50 and 75% blends produced 10 and 6.1% more yield and 14.4 and 19.5% greater N removal, respectively. The 50 and 75% ESN blends were also the most cost‐effective blend systems. These results support a recommendation of blending ESN at a rate of 50 and 75% with urea as a substitute for AN.