1. Interactions between distantly related herbivores exert powerful influences on ecosystems, but most studies to date have only considered unidirectional effects. Few have simultaneously examined the mutual effects that vertebrate herbivores and insect herbivores have on one another. 2. We conducted a set of manipulative experiments to evaluate the potential competition and facilitation between two pairs of distantly related herbivore taxa: an insect caterpillar (Gynaephora alpherakii) and two large vertebrate herbivores, yak (Bos grunniens) and Tibetan sheep (Ovis aries tibetica). 3. We found that these large herbivores consistently increased the density of caterpillars likely by improving the habitat for caterpillars. The caterpillars, in turn, decreased yak but increased Tibetan sheep foraging time and intake bites by differently changing available food resources of the two large herbivores. Diet preferences of herbivores modified the habitat and food resources, thereby causing a diet-mediated competition between yak and caterpillars, and facilitation between sheep and caterpillars. The vertebrate herbivores non-feeding upon Lamiophlomis rotata and Gentiana straminea, the caterpillars preferred habitat, increased densities of the two plant species, thus favoring the caterpillars. In turn, the caterpillar preference for Kobresia pygmaea, significantly reduced food resources for yak, while promoted food resources (multiple forbs) for sheep. 4. Synthesis. Our study indicates that two different mechanisms (the changes in habitat and food availability) induced by herbivore foraging jointly determine competitive and facilitative interactions between distantly related herbivore species. We also suggest that examining the bidirectional effects between herbivores offers a better understanding of competition and facilitation in terrestrial animal communities.