Overgrazing has resulted in widespread decline in biodiversity and ecosystem functioning in grasslands worldwide in recent decades. However, few studies have examined the patterns and thresholds of grazing-induced changes in community structure and ecosystem functioning along a grazing gradient and based on species-level responses and plant functional traits. To identify the thresholds of grazing intensity at both species and community levels, we conducted a grazing manipulation experiment with seven levels of grazing intensity (0–9 sheep ha-1) and two topographies (flat versus slope) in a typical steppe. Four plant functional traits were measured, including specific leaf area (SLA), plant height, leaf nitrogen content (LNC) and stem: leaf ratio (SLR). The threshold of grazing intensity that significantly altered community composition was at 3.75 sheep ha-1 for the flat system and 3.0 sheep ha-1 for the slope system. For both flat and slope systems, the threshold grazing intensity for changes in primary productivity was at 3.0 sheep ha-1, beyond which the productivity decreased substantially. At species level, the abundances of common species, most of which are perennial grasses, declined at moderate grazing intensities (3.0–4.5 sheep ha-1). The abundances of most rare species, which are perennial forbs, declined at low grazing intensities (1.5–3.0 sheep ha-1). Specific leaf area and leaf nitrogen content are good predictors of species-level responses to grazing. Low SLA and high LNC species are negatively affected by high grazing intensity, while high SLA and low LNC species are little affected by grazing. The negative effect of grazing intensity on species abundance was greater in the slope system than in the flat system. Synthesis and applications. Our results indicate that the structural and functioning thresholds of grazing intensity depend on plant traits and species composition, which is mediated by topographic location. These findings, integrating plant functional traits and threshold approaches, have important implications for determining sustainable grazing intensity in grassland management and biodiversity conservation in semi-arid regions.