A grazing experiment was conducted from 1992 to 1996 at a sandy grassland in the Horqin sandy land, located in the northeastern part of China. The grassland had been grazed by sheep for many years before the experiment at an intensity of 4.5 sheep ha⁻¹. The experiment consisted of 4 grazing treatments: no grazing (0 sheep ha⁻¹), light grazing (2 sheep ha⁻¹), moderate grazing (4 sheep ha⁻¹) and overgrazing (6 sheep ha⁻¹). Plant species diversity, plant biomass, soil properties, and sheep liveweight under various grazing treatments were examined. Overgrazing resulted in considerable decreases in both species diversity and plant biomass. As a result, sheep liveweight gain decreased significantly in the last 3 years of the experiment in the overgrazing treatment. No grazing and light grazing treatments had higher species diversity as well as higher biomass production than moderate grazing and overgrazing treatments. The results indicate that light sheep grazing is sufficient for the recovery of overgrazed grassland in this region and for the maintenance of plant species diversity. The proper grazing intensity should be 2–3 sheep or sheep equivalents per hectare for the sandy grassland in Inner Mongolia.