Current research on the environmental sustainability of bioenergy has largely focused on the potential of bioenergy crops to sequester carbon and mitigate greenhouse gas emissions and possible impacts on water quality and quantity. A key assumption in these studies is that bioenergy crops will be grown in a manner similar to current agricultural crops such as corn and hence would affect the environment similarly. In this study, we investigate an alternative cropping system where bioenergy crops are grown in buffer strips adjacent to current agricultural crops such that nutrients present in runoff and leachate from the traditional row-crops are reused by the bioenergy crops (switchgrass, miscanthus and native prairie grasses) in the buffer strips, thus providing environmental services and meeting economic needs of farmers. The process-based biogeochemical model Denitrification-Decomposition (DNDC) was used to simulate crop yield, nitrous oxide production and nitrate concentrations in leachate for a typical agricultural field in Illinois. Model parameters have been developed for the first time for miscanthus and switchgrass in DNDC. Results from model simulations indicated that growing bioenergy crops in buffer strips mitigated nutrient runoff, reduced nitrate concentrations in leachate by 60–70% and resulted in a reduction of 50–90% in nitrous oxide emissions compared with traditional cropping systems. While all the bioenergy crop buffers had significant positive environmental benefits, switchgrass performed the best with respect to minimizing nutrient runoff and nitrous oxide emissions, while miscanthus had the highest yield. Overall, our model results indicated that the bioenergy crops grown in these buffer strips achieved yields that are comparable to those obtained for traditional agricultural systems while simultaneously providing environmental services and could be used to design sustainable agricultural landscapes.