The increase in demand for dairy products requires continued progress in dairy farming for a sustainable supply. Europe, known as the world's leading milk producer, plays a key role in meeting this growing demand. Modern dairy farming has moved beyond its historical focus on milk yield and now focuses on functional traits such as udder health, fertility and calf survival. As a result, selection indicators have become essential tools, combining multiple attributes to support selective decisions. However, these rates show considerable variability across countries, reflecting their distinct breeding goals. Poland's production and functionality (PF) Index emphasizes production and functional traits to enhance dairy cattle. Portugal uses the total economic merit (M€T) and total performance index (IPT) for a broader assessment covering a wider range of traits. Ukraine is transitioning towards a more comprehensive breeding system incorporating stress tolerance and longevity. Factors such as climate change and the need for sustainable practices drive this evolution, underscoring the economic importance of traits beyond mere production. Future trends may include features such as feed efficiency, methane emissions reduction and stress resistance. Diverse breeding objectives across countries lead to different selection index constructions, essential for effective selection, ranking and breeding of superior individuals. This comprehensive review offers insight into constantly evolving dairy farming strategies in Europe, with a focus on Poland, Portugal and Ukraine, while highlighting the key role of functional traits in shaping the future of dairy farming.