Grazing exclusion using fences is a key policy being applied by the Chinese government to rehabilitate degraded grasslands on the Tibetan Plateau (TP) and elsewhere. However, there is a limited understanding of the effects of grazing exclusion on alpine ecosystem functions and services and its impacts on herders’ livelihoods. Our meta-analyses and questionnaire-based surveys revealed that grazing exclusion with fences was effective in promoting aboveground vegetation growth for up to four years in degraded alpine meadows and for up to eight years in the alpine steppes of the TP. Longer-term fencing did not bring any ecological and economic benefits. We also found that fencing hindered wildlife movement, increased grazing pressure in unfenced areas, lowered the satisfaction of herders, and rendered substantial financial costs to both regional and national governments. We recommend that traditional free grazing should be encouraged if applicable, short-term fencing (for 4–8 years) should be adopted in severely degraded grasslands, and fencing should be avoided in key wildlife habitat areas, especially the protected large mammal species.