Overgrazing contributes to rangeland degradation altering plant community composition, erosion and biodiversity. Little unanimity in the literature exists on the effects of livestock grazing on soil carbon and biodiversity, in part, due to uncontrolled grazing pressure from native and feral animals. Paired paddock contrasts at three, long-term (>8 years) study locations in the southern Australian rangelands were used to examine the effects of managing grazing intensity through the use of exclusion fencing and rotational grazing on soil organic carbon (SOC), soil nitrogen (TN), ground cover and biodiversity (flora and invertebrates). Grazing management had no effect on SOC or TN on grey soils (Vertisols), but for red soils (Lixisols), significantly higher levels of SOC were found for both the 0 to 5 and 5 to 10-cm soil depths (0·3% and 0·27% respectively) and associated with increased TN. We found strong and consistent relationships among SOC and higher perennial (p < 0·001), higher litter (p < 0·05) cover and close proximity to trees (p < 0·05). Managing grazing intensity resulted in significantly higher perennial ground cover (p < 0·001) on Vertisols (8·9 to 11%) and Lixisols (12·5 to 15%) and higher plant diversity (both native and exotic) but negatively impacted invertebrate diversity, indicating trade-offs between production and resources. We provide evidence that the effects of grazing management on SOC are mediated by ground cover and increased organic matter supply and/or reduced soil carbon redistribution (erosion), which indicates that the management of grazing intensity may provide a tool to avoid soil carbon loss in rangelands.