In order to explore the effects of grazing frequency on functional traits and to test whether Stipa gandis has compensatory photosynthesis during the frequent grazing period, we investigated morphological traits, biomass allocation, photosynthetic traits, and chlorophyll fluorescence parameters of the species in Inner Mongolia, China. The grazing frequency treatments included fencing (T₀), grazing in May and July (T₁, i.e., two months per year) and grazing from May to September (T₂, i.e., continuous five months per year). Results indicate that T₁ and T₂ treatments did not affect individual biomass, but T₂ treatment negatively affected individual size, i.e., plant height, stem length, and leaf length. Physiological traits of S. grandis were significantly affected by grazing, year, and their interaction. In July 2014 (i.e., dry environment and low relative humidity), the photosynthetic rate, transpiration rate and water use efficiency were highest under T₂ treatment, which was caused by the increase in stomatal conductance. However, in July 2015 (i.e., wet environment and high relative humidity), the photosynthetic rate and water use efficiency were higher under T₁ and T₂ treatments, which were caused by the increase in actual quantum efficiency and stomatal conductance. Our results implied that under frequent grazing treatment, S. grandis had small height and efficient compensatory photosynthesis, which promoted its resistance to severe grazing.