The application of composted bedding litter (wheat straw or rice hulls) that had been used to house swine has been shown to significantly improve the yield and water use of dry land grain crops growing on two contrasting soil types (a Vertosol and Sodosol) in the Wimmera region of Victoria, Australia. The effect of applying this composted litter on a range of chemical and physical properties of these soils was investigated to better understand how the composted bedding litter improved grain production. Applying bedding litter significantly increased soil total nitrogen (N) and organic carbon in both the Vertosol and Sodosol in the season after application in proportion to the rate of litter application. Applying pig bedding litter also significantly (P < 0.05) increased the level of more labile soil fertility indicators. Soil nitrate (NO3) concentration at the time of sowing of both canola in 1998 (second crop after initial application of litter) and oats/field peas in 1999 (third crop) was significantly higher than control plots at both sites, with values as high as 90 mg NO3/kg soil in the topsoil being recorded. Most of the soil NO3 resulting from the application of bedding litter was concentrated in the topsoil of the poorly structured Sodosol whereas on the Vertosol, soil NO3 tended to be distributed more evenly throughout the soil profile. Litter application also increased soil microbial N concentrations in the topsoil. Soil physical structure was improved by adding bedding litter, especially on the Sodosol soil. The application of litter decreased the number of small, unstable aggregates (250–1000 µm) whereas the number of large (>2000 µm) water stable aggregates in the topsoil (0–10 cm) was increased. Applying bedding litter also significantly decreased the exchangeable sodium percentage on the Sodosol but not on the Vertosol. Cone penetrometer resistance was reduced in the subsoil at both sites following the application of bedding litter. It was concluded that the beneficial effects of applying pig bedding litter on grain crops was attributed to several factors but the over riding effect appeared due to improved N supply on the well structured Vertosol and enhanced soil structure on the Sodosol.