Abstract Ecological resettlement (shengtai yimin in Chinese) has been initiated by the Chinese government on a large scale and aims to help degraded landscapes to recover and to improve the living standards of local people in western China. Since 2003, the government has invested RMB 7.5 billion (Chinese yuan, over U.S.$1 billion) in Qinghai Province to establish the world's second-largest nature reserve around the headwaters of the Yangtze, the Yellow and the Mekong rivers (Sanjiangyuan). The resettlement of Tibetan herders from the Sanjiangyuan grasslands to urban areas is one of the project activities. Resettlement and the grazing ban policy are understood to have profound implications for those being resettled, as well as for their home and host areas. In particular, its rationale and consequences need rethinking, from both an ecological and socio-economic perspective. This article draws on field research and a case study in Madoi County to argue the logic for resettlement, to examine its socio-economic consequences and environmental effects, and to explore possible solutions.