Faidherbia albida parklands cover a large area of the Sudano-Sahelian zone of Africa, a region that suffers from soil fertility decline, food insecurity and climate change. The parklands deliver multiple benefits, including fuelwood, soil nutrient replenishment, moisture conservation, and improved crop yield underneath the canopy. Its microclimate modification may provide an affordable climate adaptation strategy which needs to be explored. We carried out an on-farm experiment for three consecutive seasons in the Ethiopian Central Rift Valley with treatments of Faidherbia trees with bare soil underneath, wheat grown beneath Faidherbia and wheat grown in open fields. We tested the sensitivity of wheat yield to tree-mediated variables of photosynthetically active radiation (PAR), air temperature and soil nitrogen, using APSIM-wheat model. Results showed that soil moisture in the sub-soil was the least for wheat with tree, intermediate for sole tree and the highest for open field. Presence of trees resulted in 35–55% larger available N close to tree crowns compared with sole wheat. Trees significantly reduced PAR reaching the canopy of wheat growing underneath to optimum levels. Midday air temperature was about 6 °C less under the trees than in the open fields. LAI, number of grains spike−1, plant height, total aboveground biomass and wheat grain yield were all significantly higher (P < 0.001) for wheat associated with F. albida compared with sole wheat. Model-based sensitivity analysis showed that under moderate to high rates of N, wheat yield responded positively to a decrease in temperature caused by F. albida shade. Thus, F. albida trees increase soil mineral N, wheat water use efficiency and reduce heat stress, increasing yield significantly. With heat and moisture stress likely to be more prevalent in the face of climate change, F. albida, with its impact on microclimate modification, maybe a starting point to design more resilient and climate-smart farming systems.