This experiment was conducted to determine the effect of a direct-fed microbial agent, Propionibacterium strain P169 (P169), on rumen fermentation, milk production, and health of periparturient and early-lactation dairy cows. Starting 2 wk before anticipated calving, cows were divided into 2 groups and fed a control diet or the control diet plus 6 x 10(11) cfu/d of P169. Cows were changed to a lactation diet at calving, and treatments continued until 119 d in milk. Rumen fluid samples were taken about 1 wk before calving, and at 1 and 14 wk after calving. Cows fed P169 had lower concentrations of acetate (mol/100 mol of total volatile fatty acids) at all time points, greater concentrations of propionate on the first and last sampling points, and greater concentrations of butyrate on the first 2 time points. Concentrations of glucose in plasma and milk and plasma concentrations of beta-hydroxybutyrate were not affected by treatment. Cows fed P169 had greater concentrations of plasma nonesterified fatty acids on d 7 of lactation. The high nonesterified fatty acids at that time point was probably related to the high production of milk during that period by cows fed the additive. Cows fed P169 during the first 17 wk of lactation produced similar amounts of milk (44.9 vs. 45.3 kg/d, treatment vs. control) with similar composition as cows fed the control diet. Calculated net energy use for milk production, maintenance, and body weight change was similar between treatments, but cows fed the P169 consumed less dry matter (22.5 vs. 23.5 kg/d), which resulted in a 4.4% increase in energetic efficiency.