Degradation by overgrazing is common in many areas of the world and optimising grassland functions depends upon finding suitable grazing tactics. This four-year study on the northern China steppe investigated combinations of rest, moderate or heavy grazing pressure early in the summer growing season, then moderate or heavy grazing in the mid and late season. Results showed that moderate grazing pressure (~550 sheep equivalent (SE) grazing days ha−1 year−1) gave the optimal balance between maintaining a productive and diverse grassland, a profitable livestock system, and greenhouse gas mitigation. Further analyses identified that more conservative stocking (~400 SE grazing days ha−1 year−1) maintained a desirable Leymus chinensis composition and achieved a higher live weight gain of sheep. Early summer rest best maintained a desirable grassland composition, but had few other benefits and reduced incomes. These findings demonstrate that reducing grazing pressure to half the current district stocking rates can deliver improved ecosystem services (lower greenhouse gases and improved grassland composition) while sustaining herder incomes.