The difference between the theoretical maximum (potential) production and the actual production realized by farmers is referred to as the yield gap. The objectives of this study are to develop a mechanistic model for dairy cows that allows yield gap analysis in dairy production systems and to evaluate model performance. We extended and adapted an existing model for beef cattle to dairy cattle, and the new model was named Livestock simulator for Generic analysis of Animal Production Systems—Dairy cattle (LiGAPS-Dairy). Milk production and growth of an individual cow over its entire lifespan were described as a function of the animal's genotype, the ambient climate, feed quality, and available feed quantity. The model was parameterized for Holstein-Friesian cows. After calibration, we evaluated model performance by comparing simulated results and measured results from experimental farms in the Netherlands, which were not used for model calibration. Cows were permanently housed in stables, where the diet consisted of predetermined amounts of concentrates and ad libitum high-quality roughage. The mean absolute error (MAE) for simulated milk production per lactation was 12% of the measured milk production, whereas the MAE for simulated daily milk yields was 19%. The MAE for simulated feed intake per lactation was 10% of the measured feed intake, whereas the MAE for simulated daily feed intake was 19%. The average yield gap for dairy cows was 11% of the potential milk production (YP). Yield gap analysis indicated that for experimental farms in the Netherlands, the difference between YP and feed quality limited milk production (YL) of 1,009 kg fat- and protein-corrected milk was mainly explained by feed intake capacity (33%), protein deficiency (25%), cow weight at the start of experiments (23%), and heat stress (19%). The LiGAPS-Dairy model also indicated the periods during lactation in which these factors affected milk production. In our opinion, the overall model performance is acceptable for permanently housed cows under Dutch conditions. The model needs to be evaluated further for other production systems, countries and breeds. Thereafter, LiGAPS-Dairy can be used for yield gap analysis and exploration of options to increase resource use efficiency in dairy production.