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Shrubs tended to increase their abundance as climatic aridity and grazing intensity increased in the Inner Mongolian grassland. Increasing shrub abundance was believed to be due to enhanced reproduction. However, the effects of climatic aridity and grazing on the sexual reproduction of shrubs in grassland remain largely unclear. In this study, we conducted field experiments with Caragana microphylla to examine the variation of sexual reproduction aspects (seed production, seed vigor, and sapling establishment) along a climatic aridity gradient (subhumid, semiarid, arid, and dry arid zones) and a grazing intensity gradient (fenced, mildly grazed, and severely grazed). We then quantified the population growth rate based on seed production and sapling establishment rates. Our objective was to evaluate whether sexual reproduction is the main mechanism for Caragana encroachment into grasslands. We found that climatic aridity decreased seed quantity and seed vigor but increased the sapling establishment rate of Caragana shrubs. Under ungrazed conditions, climatic aridity did not affect population growth rates, while under grazing conditions, increased aridity stresses reduced population growth rates. Grazing reduced seed production, sapling establishment, and population growth rates. Climatic aridity enhanced the negative effects of grazing on sexual reproduction, while grazing intensified the negative effects of aridity on the population growth of Caragana shrubs. In conclusion, climatic aridity, grazing, and their combined effects had negative effects on the sexual reproduction of Caragana shrubs. Therefore, sexual reproduction could not fully explain the increased abundance of shrubs with increasing aridity and grazing. Clonal reproduction might be of considerable importance for understanding the mechanism of shrub encroachment in grasslands. [ABSTRACT FROM AUTHOR]