The increasing global demand for biofuels will require conversion of conventional agricultural or natural ecosystems. Expanding biofuel production into areas now used for agriculture reduces the need to clear natural ecosystems, leading to indirect climate benefits through reduced greenhouse-gas emissions and faster payback of carbon debts. Biofuel expansion may also cause direct, local climate changes by altering surface albedo and evapotranspiration, but these effects have been poorly documented. Here we quantify the direct climate effects of sugar-cane expansion in the Brazilian Cerrado, on the basis of maps of recent sugar-cane expansion and natural-vegetation clearance combined with remotely sensed temperature, albedo and evapotranspiration over a 1.9 million km2 area. On a regional basis for clear-sky daytime conditions, conversion of natural vegetation to a crop/pasture mosaic warms the cerrado by an average of 1.55 (1.45-1.65) °C, but subsequent conversion of that mosaic to sugar cane cools the region by an average of 0.93 (0.78-1.07) °C, resulting in a mean net increase of 0.6 °C. Our results indicate that expanding sugar cane into existing crop and pasture land has a direct local cooling effect that reinforces the indirect climate benefits of this land-use option.