There is growing recognition of the need to achieve land use across the southern Australian rangelands that accommodates changing societal preferences and ensures the capacity of future generations to satisfy their own preferences. This paper considers the prospects for sustainable use of the pastoral lands based either on continued grazing or emerging, alternative land uses. After an overview of the southern rangelands environment, the status of the pastoral industry, its environmental impacts, and key issues for pastoral management, we propose four principles and 19 associated guidelines for sustainable pastoralism. Although some continued withdrawal of land from pastoralism is anticipated, we expect that pastoralism will continue throughout much of the region currently grazed, particularly in the higher rainfall environments in the east. Within these areas, sustainable pastoral land use should be achievable by the application of four broad management principles, as follows: (1) manage grazing within a risk management framework based on the concept of tactical grazing, (2) develop infrastructure to allow best management of both domestic and non-domestic grazing pressure, (3) incorporate management of invasive native scrub, where required, into overall, ongoing property management and (4) manage grazing to enhance biodiversity conservation at landscape scale. Application of these principles and guidelines will require the development of appropriate policy settings, particularly in relation to kangaroo management, climate change, and natural resource governance, together with innovative approaches to research, development and extension. Policy development will also be required if the new industry of carbon sequestration is to deliver socio-ecological benefits without perverse outcomes. Other emerging industries based on renewable energy or ecosystem services appear to have considerable potential, with little risk of adverse ecological consequences.