Grazing is one of the most important factors influencing community structure and productivity in natural grasslands. Fencing to exclude grazers is one of the main management practices used to protect grasslands. Can fencing improve grassland community status by restraining grazing? We conducted a field community study and indoor soil analyses to determine the long-term effects of fencing and grazing on the above-ground community and soil in a Kobresia-dominated meadow in the Qinghai-Tibetan Plateau, NW China. Our results showed that fencing significantly improved above-ground vegetation productivity but reduced plant density and species diversity. Long-term fencing favored the improvement of forage grass functional groups and restrained the development noxious weed functional groups. There were significant positive effects of fencing on below-ground organic matter, total nitrogen, available nitrogen, total phosphorus and available phosphorus. The productivity of grazed meadow showed a weak decrease over time. There were long-term decreasing trends for plant density both in fenced and grazed meadows. Our study suggests that grazing can be considered as a useful management practice to improve species diversity and plant density in long-term fenced grasslands and that periodic grazing and fencing is beneficial in grassland management.