  We study supersymmetric vacua of the N=1 cascading SU(M+p)xSU(p) gauge theory
with flavor - the theory on p D3-branes and M wrapped D5-branes at the tip of
the conifold, and N_f flavor D7-branes wrapping a holomorphic four-cycle inside
the conifold. The Coulomb branch of the moduli space is inherited from the pure
gauge theory without flavor and was thoroughly studied in the past. Besides,
there is a Higgs branch where some D3 and/or D5-branes dissolve in the
D7-branes forming the worldvolume gauge instantons. We study the Higgs branch
both from the field theory and the bulk point of view. On the classical level
the moduli space is closely related to the one of the N=2 C^2/Z_2 orbifold
theory, in particular certain vacua of the N=1 theory are related to
noncommutative instantons on the resolved C^2/Z_2. On the quantum level the
Higgs branch acquires corrections due to renormalization of the Kahler
potential and non-perturbative effects in field theory. In the bulk this is
encoded in the classical D7-brane geometry. We compute the VEVs of the
protected operators and the field theory RG flow and find an agreement with the
parallel computations in the bulk.
