Land degradation in the arid Aletai Region in northern China is not only detrimental to animal production, but also reduces the ability to conserve water resources by destabilising the catchments of rivers which affects runoff, thus, threatening the sustainable use of these grasslands. A new approach to grassland management based on carrying capacity and ecological services value of grassland types, using an index of classification management (ICG), was designed to ensure the sustainability of grassland ecosystems. In this approach, grassland is classified into 3 management sectors. The first is conservation grassland, which is mainly devoted to ecological and social values; the second is the moderately productive grassland, dedicated to multiple benefits by rational use; and the third is intensively productive grassland, focusing on maximum economic effect. For the arid Aletai region, no intensively productive grassland was available. Conservation grassland occupied 2.5 million ha, accounted for 25.4% of grassland area, and included alpine meadow, mountain meadow, mountain meadow steppe, mountain steppe and flat meadow. In these grasslands, grazing should be eliminated to allow restoration of degenerated areas, protect grasslands with important ecological values from destruction, and to further improve the environment. Moderately productive grassland covered 7.3 million ha, and the grassland types were alpine steppe, mountain desert steppe, plain desert steppe, steppe desert, and plain desert. Agricultural measures, such as fertiliser and irrigation application, should be used to enhance the productivity of these grasslands.