Soil degradation is a global concern, decreasing the soil’s ability to perform a multitude of functions. In Europe, one of the leading causes of soil degradation is unsustainable agricultural practices. Hence, there is a need to explore alternative production systems for enhanced agronomic productivity and environmental performance, such as agroforestry systems (AFS). Given this, the objective of the study is to enumerate the major benefits and challenges in the adoption of AFS. AFS can improve agronomic productivity, carbon sequestration, nutrient cycling, soil biodiversity, water retention, and pollination. Furthermore, they can reduce soil erosion and incidence of fire and provide recreational and cultural benefits. There are several challenges to the adoption and uptake of AFS in Europe, including high costs for implementation, lack of financial incentives, limited AFS product marketing, lack of education, awareness, and field demonstrations. Policies for financial incentives such as subsidies and payments for ecosystem services provided by AFS must be introduced or amended. Awareness of AFS products must be increased for consumers through appropriate marketing strategies, and landowners need more opportunities for education on how to successfully manage diverse, economically viable AFS. Finally, field-based evidence is required for informed decision-making by farmers, advisory services, and policy-making bodies.