Fencing is conductive to damaged grassland ecosystem restoration. 5 years fencing experiment from 2007 to 2011 was carried out to continuously monitor the sample fields vegetation and soil seed bank, and to study on the comprehensive restoration effect of fencing on the vegetation and soil seed bank in Xilamuren degraded grassland, Inner Mongolia. The results showed as follows: ① Biomass, coverage and height of fencing plot are notably more than that of heavy grazing plot. Stipa krylovii and Leymus chinesis are dominant and therefore the lower the Shannon-Wiener biodiversity index is. The production of heavy grazing plot is less than the fencing plot. Aritimisia frigida, Convolvulus ammannii and Salsols collina etc. are dominant and therefore the larger the Shannon-Wiener biodiversity index is. ②Precipitation decides the situation of soil seed bank. Fencing promotes the cumulative of all plant seeds in soil. There is a big difference in soil seed bank between fencing plot and heavy grazing plot, the former Stipa krylovii is dominant, the latter Aritimisia frigida, Convolvulus ammannii and Salsols collina et al. are dominant. Fencing can promote production performance of grassland and accumulation of soil seed bank, but fencing for long-term is not conductive to grassland biodiversity. Moderate or light grazing can promote grassland biodiversity.