A total of 4,752 monthly lactation records of Friesian cows during the period from 2000 to 2005 were used to estimate genetic parameters and to determine the effect of udder health on milk production traits. Three milk production traits were studied: 305-day milk yield (305-dMY), 305-day fat yield (305-dFY) and 305-day protein yield (305-dPY). Four udder health traits were studied: somatic cell count (SCC), mastitis (MAST), udder health status (UDHS) with 10 categories and udder quarter infection (UDQI) with 7 categories. Mixed model least square analysis was used to estimate the fixed effects of month and year of calving and parity (P) on different studied traits. Sire and dam within sire were included in the model as random effects. Data were analyzed using Multi-trait Derivative Free Restricted Maximum Likelihood methodology (MTDFREML) to estimate genetic parameters. Unadjusted means of 305-dMY, 305-dFY, 305-dPY and SCC were 3,936, 121, 90 kg and 453,000 cells/ml, respectively. Increasing SCC from 300,000 to 2,000,000 cells/ml increased UDQI from 5.51 to 23.2%. Losses in monthly and lactationally milk yields per cow ranged from 17 to 93 and from 135 to 991 kg, respectively. The corresponding losses in monthly and lactationally milk yields return per cow at the same level of SCC ranged from 29.8 to 163 and from 236 to 1,734 Egyptian pounds, respectively. Heritability estimates of 305-dMY, 305-dFY, 305-dPY, SCC, MAST, UDHS, UDQI were 0.31${pm}$0.4, 0.33${pm}$0.03, 0.35${pm}$0.05, 0.23${pm}$0.02, 0.14${pm}$0.02, 0.13${pm}$0.03, and 0.09${pm}$0.01, respectively. All milk production traits showed slightly unfavorable negative phenotypic and genetic correlations with SCC, MAST, UDHS and UDQI. There were positive and high genetic correlations between SCC and each of MAST (0.85${pm}$0.7), UDHS (0.87${pm}$0.10) and UDQI (0.77${pm}$0.06) and between MAST and each of UDHS (0.91${pm}$0.11) and UDQI (0.83${pm}$0.07). It could be concluded that the economic losses from mastitis and high SCC are considerable. The high genetic correlation between SCC and clinical mastitis (CM) suggest that the selection for lower SCC would help to reduce or eliminate the undesirable correlated responses of clinical mastitis associated with selection for increasing milk yield. Additionally, it is recommended also that if direct information on under health traits is not available, measures of SCC can be inclusion in a selection criteria to improve the income from dairy cows.