Increasing shortages and costs of common bedding materials have led dairy farmers in Sweden to consider using recycled manure solids (RMS), which are readily available and low cost, as an alternative bedding material. The main risks are effects on udder health and milk quality, but RMS could also affect animal welfare and claw health. The advantages and disadvantages of using RMS bedding have not been fully investigated, and findings in other countries cannot be directly applied to Swedish conditions and climate. This observational cross-sectional study investigated the use of RMS as bedding, regarding associations with certain aspects of animal welfare, herd health, milk quality, and bedding costs in Swedish dairy herds. Thirty-four dairy farms using RMS or wood shavings/sawdust (each n = 17) were compared. Each farm was visited 2 times during the housing period from 2020 to 2021, once from October to December and once from March to May. Dairy barns were observed, animal welfare was assessed, and freestall dimensions were measured. Farm owners were interviewed about housing system characteristics, herd performance, and herd management. Data on milk production and herd health were obtained from the Swedish official milk recording scheme for the indoor period from October to March. The prevalence of claw disorders and abnormal claw conformation were collected from the national claw health database for the period from October to May. On each farm visit, composite samples of unused bedding outside the barn and used bedding material from the freestalls, respectively, were taken for total bacterial count and DM analysis. Samples of bulk tank milk for determination of total bacterial count were taken in connection to the visits. In addition, samples of unused and used bedding material and manure from alleys for analysis of 3 Treponema species associated with digital dermatitis (DD) were gathered and analyzed. Total bacterial count was significantly higher in unused (8.50 log10 cfu/g) and used RMS bedding (9.75 log10 cfu/g) than in wood shavings/sawdust (used 4.74; unused 8.63 log10 cfu/g), but there were no significant differences in bulk milk total bacterial count (median 4.07 vs. 3.89 log10 cfu/mL) or SCC (median 243,800 vs. 229,200 cells/mL). The aspects of animal welfare assessed did not differ significantly between the 2 bedding systems, whereas the prevalence of total claw disorders (25.9% vs. 38.0% of trimmed cows), dermatitis (6.9% vs. 16.2% of trimmed cows) and sole ulcers (2.0% vs. 4.0% of trimmed cows) were significantly lower in the RMS herds. Treponema spp. were not detected in unused RMS material, but all RMS herds had presence of DD recorded at foot trimming. An economic assessment based on the interview results and price level from winter 2021 revealed that the costs of RMS bedding varied with amount of RMS produced. Thus, RMS is a potential alternative bedding material for dairy cows in Sweden and can be a profitable option for large dairy herds. However, the high level of total bacteria in the material requires attention to bedding and milking routines as well as regular monitoring of herd health.