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Background and aims: The warming of the planet in recent decades has caused rapid, widespread permafrost degradation on the Qinghai-Tibet Plateau. These changes may significantly affect soil moisture content and nutrient supply, thereby affecting ecosystem structure and function. This study aimed to describe the dynamic changes in thaw depth, assess the relationship between thaw depth and soil moisture content, and analyze the changes in species composition and water-use efficiency in response to permafrost degradation. Methods: We surveyed species composition, thaw depth, ground temperature, soil moisture, nutrient content, and foliar stable carbon isotope compositions to gain insights into the response of alpine grassland ecosystems to permafrost degradation on the Qinghai-Tibet Plateau. Results: Moisture content of the surface layer decreased with increasing thaw depth. The correlation between thaw depth and surface soil moisture content was strongest in June and decreased in July and August. The strongest correlation occurred at a depth of 20 cm to 30 cm. The dominant species shifted from Cyperaceae in alpine meadow to mesoxerophytes in alpine steppe before finally shifting to xerophytes in alpine desert steppe. Thaw depth correlation was significantly negative with organic C content ( r = −0.49, P < 0.05) and with total N content ( r = −0.62, P < 0.01). The leaf δC of Carex moorcroftii increased with increasing thaw depth and followed a linear relationship ( R = 0.85, P = 0.008). Conclusions: Permafrost degradation decreases surface soil moisture and soil nutrient supply capacity. Increasing permafrost degradation decreases the number of plant families and species, with hygrophytes and mesophytes gradually replaced by mesoxerophytes and xerophytes. The water-use efficiency of plants improved in response to increasing water stress as surface layers dried during permafrost degradation. Permafrost on the Qinghai-Tibetan Plateau is expected to further degrade as global warming worsens. Therefore, more attention should be dedicated to the response of alpine ecosystems during permafrost degradation. [ABSTRACT FROM AUTHOR]