AbstractThe variability of annual precipitation and grazing are primary drivers shaping the structure and function of plant communities in grasslands. Yet it remains unclear on a mechanistic understanding of how annual precipitation and grazing affect the plant community structure, function, and their linkage via direct or indirect pathways. We measured the plant community structure (plant traits, species abundance, and plant diversity), total aboveground biomass, total cover, and species covers in plant communities in responses to annual precipitation variability from 2014 to 2017 and grazing pressure comprising 0, 0.93, 1.82, and 2.71 sheep ha−1 in a desert steppe. Two‐way ANOVAs, ordinary least square regressions, and the structural equation modeling (SEM) were used to test the impacts of annual precipitation variability and grazing pressure on the plant community structure and function. Results showed that higher annual precipitation of 2016 and 2017 increased the relative abundances of forbs; grazing pressure increased the relative abundances of dominant grasses [Stipa breviflora Griseb. and Cleistogenes songorica (Roshev.) Ohwi], but decreased those of subdominant forbs (Convolvulus ammannii Desr. and Artemisia frigida Willd.). Plant traits, such as leaf nitrogen concentration, regulated plant species abundance directly or indirectly via affecting sheep diet selection. Annual precipitation variability and grazing pressure independently regulated plant diversity, aboveground biomass, and total cover, which the former had larger effects. There was slower decrease in grass biomass than that in forb biomass with increasing grazing pressure, indicating that dominant grasses are resilient to grazing but subdominant forbs are sensitive due to their distinct difference in sward palatability. The positive correlation between plant diversity and aboveground biomass was driven by both annual precipitation variability and grazing pressure. These highlight direct and indirect (via traits and abundances of plant species) effects of annual precipitation and grazing in shaping the structure and function of desert steppe ecosystems.