Bacillus Calmette-Guérin (BCG) is a routinely used vaccine for protecting children against Mycobacterium tuberculosis that comprises attenuated Mycobacterium bovis. BCG can also be used to protect livestock against M. bovis; however, its effectiveness has not been quantified for this use. We performed a natural transmission experiment to directly estimate the rate of transmission to and from vaccinated and unvaccinated calves over a 1-year exposure period. The results show a higher indirect efficacy of BCG to reduce transmission from vaccinated animals that subsequently become infected [74%; 95% credible interval (CrI): 46 to 98%] compared with direct protection against infection (58%; 95% CrI: 34 to 73%) and an estimated total efficacy of 89% (95% CrI: 74 to 96%). A mechanistic transmission model of bovine tuberculosis (bTB) spread within the Ethiopian dairy sector was developed and showed how the prospects for elimination may be enabled by routine BCG vaccination of cattle.