Plant functional traits have been widely used to study the linkage between environmental drivers, trade-offs among different functions within a plant, and ecosystem structure and functioning. Here, the whole-plant traits, leaf morphological and physiological traits of two dominant species, Leymus chinensis (C3 perennial rhizome grass) and Cleistogenes squarrosa (C4 perennial bunchgrass), were studied in the Inner Mongolia grassland of China, with a grazing experiment including five stocking rates (0, 3.0, 4.5, 7.5, and 9.0 sheep/ha) in 2008 (wet year) and 2009 (dry year). Our results demonstrated that, for both species, the effects of stocking rate, year, and stocking rate×year on whole-plant traits and leaf morphological and physiological traits were highly significant in most cases. The differential responses of plant trait to variation in precipitation were caused by trait trade-offs between the wet and dry years. L. chinensis adopted the high N content and net photosynthetic rate (Pn) in the wet year but both the low N content and Pn in the dry year under grazed conditions. The trait trade-offs of C. squarrosa were characterized by high specific leaf area (SLA) and Pn in the dry year vs. low SLA and Pn in the wet year. Our findings also indicate that C. squarrosa is more resistant to grazing than L. chinensis in terms of avoidance and tolerance traits, particularly under heavy grazing pressure and in the dry year.