Background: Grassland degradation caused by overgrazing poses a threat to both animal husbandry and environmental sustainability in most semi-arid areas especially north China. Although the Chinese Government has made huge efforts to restore degraded grasslands, a considerable attempt has unfortunately failed due to an inadequate consideration of economic benefits to local communities.

Methodology/Principal Findings: A controlled field experiment was conducted to test our hypothesis that utilizing natural grasslands as both habitat and feed resources for chickens and replacing the traditional husbandry system with chicken farming would increase environmental sustainability and raise income. Aboveground plant biomass elevated from 25 g m22 for grazing sheep to 84 g m22 for chicken farming. In contrast to the fenced (unstocked) grassland, chicken farming did not significantly decrease aboveground plant biomass, but did increase the root biomass by 60% (p,0.01). Compared with traditional sheep grazing, chicken farming significantly improved soil surface water content (0–10 cm), from 5% to 15%. Chicken farming did not affect the soil bulk density, while the traditional sheep grazing increased the soil bulk density in the 0–10 cm soil layer by 35% of the control (p,0.05). Most importantly, the economic income of local herdsmen has been raised about six times compared with the traditional practice of raising sheep. Ecologically, such an innovative solution allowed large degraded grasslands to naturally regenerate. Grasslands also provided a high quality organic poultry product which could be marketed in big cities.

Conclusion/Significance: Chicken farming is an innovative alternative strategy for increasing environmental sustainability and economic income, rather than a challenge to the traditional nomadic pastoral system. Our approach might be technically applicable to other large degraded grasslands of the world, especially in China.