Cover crops provide soil cover benefits but can impose allelopathic risks on cotton. We evaluated the functional trade-offs of rye and wheat residues versus purified 2-benzoxazolinone (BOA) under greenhouse conditions. Four experiments applied graded residue or BOA inputs in Pullman clay loam; cotton germination, height, chlorophyll (SPAD), and biomass were measured, and soil BOA, DIBOA, and DIMBOA were quantified by HPLC at designated sampling dates. Responses were dose dependent: BOA reduced germination linearly (−16.5% at 1000 nmol g⁻¹ versus control) and shortened plants, and biomass and SPAD were directionally lower, most evident at 500 nmol g⁻¹, but not statistically significant. Rye showed hormesis at 6400 kg ha⁻¹ (+7.3% germination) and strong inhibition at 12,800 kg ha⁻¹ (−31% germination; biomass up to −45%). Wheat produced intermediate inhibition (biomass −23.7%) and did not affect germination. In soil, benzoxazinoids exhibited significant rate effects at specific sampling dates followed by rapid decline. After storage, BOA showed no residual effects, whereas prior rye still reduced height, SPAD, and biomass. Framed at the agroecosystem scale, maintaining residue biomass below inhibitory thresholds and adjusting termination-to-planting intervals to avoid the early post-termination period, together with species or cultivar choice, can reconcile soil cover services with reliable cotton establishment.