Abundant evidence has shown that grazing alters plant functional traits, community structure and ecosystem functioning of grasslands. Few studies, however, have tested how plant responses to grazing are mediated by resource availability and plant functional group identity. We examined the effects of grazing on functional traits across a broad range of species along a soil moisture gradient in Inner Mongolia grassland. Our results showed that trait syndromes of plant size (individual biomass) and shoot growth (leaf N content and leaf density) distinguished plant species responses to grazing. The effects of grazing on functional traits were mediated by soil moisture and dependent on functional group identity. For most species, grazing decreased plant height but increased leaf N and specific leaf area (SLA) along the moisture gradient. Grazing enhanced the community-weighted attributes (leaf NCWM and SLACWM), which were triggered mainly by the positive trait responses of annuals and biennials and perennial grasses, and increased relative abundance of perennial forbs. Our results suggest that grazing-induced species turnover and increased intraspecific trait variability are two drivers for the observed changes in community weighted attributes. The dominant perennial bunchgrasses exhibited mixed tolerance-resistance strategies to grazing and mixed acquisitive-conservative strategies in resource utilization.