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Background: Habitat fragmentation, water resources and biological characteristics are important factors that shape the genetic structure and geographical distribution of desert plants. Analysis of the relationships between these factors and population genetic variation should help to determine the evolutionary potential and conservation strategies for genetic resources for desert plant populations. As a traditional Chinese herb, Glycyrrhiza inflata B. (Fabaceae) is restricted to the fragmented desert habitat in China and has undergone a dramatic decline due to long-term over-excavation. Determining the genetic structure of the G. inflata population and identifying a core collection could help with the development of strategies to conserve this species. Results: We investigated the genetic variation of 25 G. inflata populations based on microsatellite markers. A high level of population genetic divergence (FST = 0.257), population bottlenecks, reduced gene flow and moderate genetic variation (HE = 0.383) were detected. The genetic distances between the populations significantly correlated with the geographical distances, and this suggests that habitat fragmentation has driven a special genetic structure of G. inflata in China through isolation by distance. STRUCTURE analysis showed that G. inflata populations were structured into three clusters and that the populations belonged to multiple water systems, which suggests that water resources were related to the genetic structure of G. inflata. In addition, the biological characteristics of the perennial species G. inflata, such as its long-lived seeds, asexual reproduction, and oasis ecology, may be related to its resistance to habitat fragmentation. A core collection of G. inflata, that included 57 accessions was further identified, which captured the main allelic diversity of G. inflata. Conclusions: Recent habitat fragmentation has accelerated genetic divergence. The population genetic structure of G. inflata has been shaped by habitat fragmentation, water resources and biological characteristics. This genetic information and core collection will facilitate the conservation of wild germplasm and breeding of this Chinese medicinal plant. [ABSTRACT FROM AUTHOR]