Abstract Soil labile C fractions have been proposed as promising soil health indicators, but they have not been related to extensive soil properties and crop yields. We evaluated the relationships among soil organic carbon (SOC), labile C fractions, 62 soil physical, chemical, biological, and biochemical properties, and mean crop yields in two long‐term (14‐ and 36‐yr‐old) sites (Froid and Sidney, eastern Montana) under dryland farming. Soil C fractions were SOC, soil inorganic carbon (SIC), water‐extractable carbon (WEC), KMnO 4 –extractable carbon (POXC), potential carbon mineralization (PCM), and microbially active carbon (MAC). Treatments were conventional till and no‐till spring wheat ( Triticum aestivum L.)/barley ( Hordeum vulgaris L.), pea ( Pisum sativum L.), and fallow rotations without N fertilization in Froid and with and without N fertilization in Sidney. Carbon fractions were greater in no‐till continuous cropping than till crop–fallow, with no effect of N fertilization at both sites. The principal component analysis showed that PCM was strongly associated with most soil physical, chemical, biological, and biochemical properties, followed by SOC, POXC, WEC, MAC, and SIC at both sites. More C fractions were related to soil properties in longer than shorter duration of the experiment. All C fractions, except SIC, were also related to mean crop yields across years. Although SOC was related to soil properties and crop yields, PCM may be used as a promising soil health indicator because of its greater sensitivity to management practices and better relationship to soil properties and crop yields than other labile C fractions.