The primary objective of this study was to improve the productive efficiency of growth via optimal use of both high fiber-low quality and high energy-high protein feeds in diets for growing dairy cattle. Twenty Holstein heifers were randomly assigned to either a control or treatment group. The control diet met the National Research Council (NRC) requirement for .45 kg/d gain, with heifers calving at 24 to 26 mo of age. The test groups were fed according to a 5-2-5-2 mo schedule in which the nutrient density was alternately 15% below or 40% above the NRC requirement. Results showed that the heifers on the test dietary regimen (compensatory growth) gained more and consumed less, resulting in significantly improved efficiency of growth (body gain/dry matter intake X 100), energy (body gain X 1,000/metabolizable energy (ME) intake) and protein utilization (body gain/protein intake X 100) in comparison to control animals (13.0 vs 7.3%; 57.9 vs 32.6 g/Mcal ME; 96.5 vs 54.2%, respectively). Marked changes in average concentration of urea-N, glucose, triglycerides, cholesterol and lecithin cholesterol acyltransferase activity in blood were seen for test heifers during the stair-step growth phase (i.e., alternating maintenance and compensatory). Evidence from this experiment suggests that the phased growth (stair-step) system offers a simple, practical and cost-effective method for raising dairy heifers.