Historically many towns in inland Australia disposed of their treated sewage by pumping into local rivers. This is no longer a feasible proposition. Alternatives to river pumping include irrigation and/or aquaculture. As treated sewage effluent may contain large amounts of nitrogen, phosphorus and sodium salts, if not managed carefully, soil salinity, sodicity and nutrient accumulation could increase. The objective of this study was to evaluate if gypsum application had any effect on soil-quality changes in a Vertisol due to irrigating a cotton-wheat rotation with tertiary treated sewage effluent. The treatments were application of 2(.)5 t ha(-1) of gypsum in June 2000 before commencing irrigation and an untreated control. Annually, between June 2000 and April 2004, irrigation water quality and soil changes in nitrate-N, EC1:5, pH, organic carbon, Cl, dispersion index, and exchangeable cations to a depth of 1(.)8 m were measured and deep drainage inferred with the chloride mass balance method. Cotton lint yield and fibre characteristics were also evaluated. Irrigation with treated sewage effluent increased exchangeable Na in all depths, and exchangeable Ca and K in the clayey-textured surface 0(.)6 m, but decreased exchangeable Ca and K, and SOC in the coarser clay-loam-textured depths > 0(.)6 m. Nitrate-N leaching, associated with deep drainage had occurred, as the crops had not used all the N in irrigation water. Gypsum application decreased exchangeable Ca, increased dispersion and during the 2003-2004 season deep drainage, but had no effect on salinity, sodicity or pH. Application of commercial gypsum at sub-optimal rates with sodium-rich irrigation water is, therefore, unlikely to improve soil properties. Stubble incorporation before sowing cotton in 2003 appears to have mobilized gypsum applied during 2000. Gypsum application reduced cotton lint yield and fibre quality during 2003-2004. Copyright (c) 2006 John Wiley & Sons, Ltd.