Selection of grazing-tolerant lucerne (Medicago sativa L.) for mild-winter environments is challenged by marked cold-season dormancy and prostrate habit often observed in tolerant material. This study aimed to assess the amount of genetic variation and genetically based trade-offs for key traits in four biparental populations, and their implications for selection. Some 432 cloned F₁ progenies from four crosses between contrasting genotypes (erect, not very dormant, non-grazing tolerant v. prostrate, dormant, tolerant) were evaluated for dry matter (DM) yield and final plant persistence under continuous, intense sheep grazing for 3 years, along with a set of morpho-physiological traits. Both DM yield and persistence displayed negative genetic correlation with erect plant habit (r_g –0.31 to –0.87, depending on the cross), with persistence inversely related also to cold-season growth (r_g –0.33 to –0.73). Correlations of performance traits with DM yield before grazing management, plant diameter and leaflet area were inconsistent or nil. DM yield during grazing management and persistence exhibited large genetic variation (CV_g 33.3–57.8%), and within-cross variance largely exceeded between-cross variance. Morpho-physiological traits had lower genetic variation and even greater relative within-cross variance than yield and persistence. Selection for grazing-tolerant germplasm could exploit large genetic variation, but it requires extensive within-cross genotype evaluation to produce material with little dormancy and relatively erect growth habit.