Shrub encroachment could substantially alter species composition of grassland communities and cause changes in ecosystem structure and function. However, the distribution patterns and ecological impacts of shrub encroachment still remain unclear in Inner-Mongolian grasslands. In this study, we investigated 43 sites of shrub-encroached grasslands (SEGs) and 32 sites of non-shrub encroached grasslands (CGs) across the Inner Mongolia to explore their community characteristics and the effects of shrub encroachment on biodiversity and carbon storage in temperature grasslands. The results showed that: 1) Shrub cover and patch size increased significantly with increasing longitude, and showed a hump-shaped latitudinal pattern, which was mainly affected by precipitation. 2) There was no significant difference in the richness and abundance of herbaceous species between SEGs and CGs, but the biomass was significantly lower in SEGs than CGs; 3) Soil organic carbon and total nitrogen were slightly higher in SEGs than CGs. Our study has an implication in regional biodiversity protection and carbon management.