Due to the scarcity of alternative organic amendments, the retention of crop residue in fields can be considered key in promoting physical, chemical, and biological attributes of soil health in agricultural systems of developing countries. However, due to multiple other uses, small landholders in these countries are faced with trade-offs in managing crop residues. This article reviews crop residue management practices, mainly surface retention, incorporation or removal, describing their advantages and limitations in cereal-based agroecosystems in developing countries. The benefits of residue retention are regionally variable and depend on both agroclimatic and socioeconomic factors. Most studies from developing countries in Asia, Latin America, and Africa show positive effects of retaining crop residues on soil quality, soil organic matter and carbon storage, soil moisture retention, enhanced nutrient cycling, and decreased soil loss, among other environmental and soil health benefits. Variation was observed in the effect of surface retention vs. incorporation on various soil properties indicating the importance of taking into account abiotic factors such as climate, soil texture, study duration, sampling methods, and agronomic practices when assessing the impact of these practices. Negative effects of residue retention on crop performance attributed to nitrogen immobilization, waterlogging and decreased soil temperature have also been reported in some environments. Residue trade-offs in mixed crop-livestock systems in developing countries can limit the amount of residue retained. However, interventions such as intensification, partial retention, improved return of nutrients from manures, and the provision of substitutes to the current functions of livestock (e.g. mechanization, insurance) could reduce these residue trade-offs in favour of promoting long-term soil health.