Breeding to reduce the prevalence of categorically scored hip dysplasia (HD), based on phenotypic assessment of radiographic hip status, has had limited success. The aim of this study was to evaluate two selection strategies for improved hip status: truncation selection based on phenotypic record versus best linear unbiased prediction (BLUP), using stochastic simulation and selection scenarios resembling those in real dog populations. In addition, optimum contribution selection (OCS) was evaluated. Two traits were considered: HD (as a categorical trait with five classes and a heritability of 0.45 on the liability scale) and a continuous trait (with a heritability of 0.25) intended to represent other characteristics in the breeding goal. A population structure mimicking that in real dog populations was modelled. The categorical nature of HD caused a considerably lower genetic gain compared to simulating HD as a continuous trait. Genetic gain was larger for BLUP selection than for phenotypic selection in all scenarios. However, BLUP selection resulted in higher rates of inbreeding. By applying OCS, the rate of inbreeding was lowered to about the same level as phenotypic selection but with increased genetic improvement. For efficient selection against HD, use of BLUP breeding values should be prioritized. In small populations, BLUP should be used together with OCS or similar strategy to maintain genetic variation.