The objectives of this study were to estimate from test day records the genetic and environmental (co)variance components, correlations, and breeding values to increase genetic gain in milk yield of Lucerna and US Holstein cattle. The effects of repeated observations (within cow) were explained by first-order autoregressive processes within and across lactations using an animal model. Estimates of variance components and correlation coefficients between test days were obtained using derivative-free REML methodology. The autoregressive structure significantly reduced the model error component by disentangling the short-term environmental effects. The additional information and the more heterogeneous environmental variances between lactations in the multiple-lactation test day model than in the first lactation model provided substantially larger estimates of additive genetic variance (0.62 kg2 for Lucerna; 14.73 kg2 for Holstein), heritability (0.13 for Lucerna; 0.42 for Holstein), and individual genetic merit. Rank correlations of breeding values from multiple lactations and from first lactations ranged from 0.18 to 0.37 for females and from 0.73 to 0.89 for males, respectively. Consequently, more selection errors and less genetic gain would be expected from selection decisions based on an analysis of first lactation only, and greater accuracy would be achieved from multiple lactations. Results indicated that substantial genetic gain was possible for milk yield in the Lucerna herd (34 kg/yr). Estimates of genetic variance for Holsteins were larger than previously reported, which portends more rapid genetic progress in US herds also; under our assumptions, increases would be from 173 to 197 kg/yr.