Climate‐smart agriculture (CSA) is an integrated approach to sustainably meeting food, fiber, and feed production needs. The technical and socioeconomic feasibility of different CSA strategies depends on local conditions, and there is no one‐size‐fits‐all approach. Here, we review two key aspects of CSA with a focus on Texas: soil C sequestration and water management. Carbon sequestration potential is highly variable across Texas as it depends on local biophysical conditions and soil management practices in place, for example, tillage and cover crops. Grasslands also have an important role to play in C sequestration. Important co‐benefits of effective soil management for C sequestration, such as reduced CO2 emissions, enhanced soil structure, and increased microbial activity, can positively impact soil fertility and productivity. The economic and political realities of C sequestration will have a strong influence on the implementation of technically feasible strategies. The major challenge for water management is the sustainable allocation of increasingly scarce resources. Expanded irrigation is a short‐term solution, but in many cases, the existing water supply is insufficient to meet future demand. A drying Texas, and aquifer depletion, portends lower future supplies. The Panhandle, Llano Estacado, and Rio Grande regions have the greatest projected gaps between future supply and demand. Increasing water‐use efficiency and using drought‐tolerant crops are important management goals and precision agriculture with site‐specific management measures could help improve drought resiliency. Texas’ geographic diversity is reflected in the variety of agricultural commodities produced by the state, and CSA activities are likely to be equally diverse.