Chinese temperate grasslands play an important role in the terrestrial carbon cycle. Based on the parameterization and validation of Terrestrial Ecosystem Model (TEM, Version 5.0), we analyzed the carbon budgets of Chinese temperate grasslands and their responses to historical atmospheric CO₂ concentration and climate variability during 1951–2007. The results indicated that Chinese temperate grassland acted as a slight carbon sink with annual mean value of 7.3 T g C, ranging from -80.5 to 79.6 T g C yr^-1. Our sensitivity experiments further revealed that precipitation variability was the primary factor for decreasing carbon storage. CO₂ fertilization may increase the carbon storage (1.4 %) but cannot offset the proportion caused by climate variability (-15.3 %). Impacts of CO₂ concentration, temperature and precipitation variability on Chinese temperate grassland cannot be simply explained by the sum of the individual effects. Interactions among them increased total carbon storage of 56.6 T g C which 14.2 T g C was stored in vegetation and 42.4 T g C was stored in soil. Besides, different grassland types had different responses to climate change and CO₂ concentration. NPP and R_H of the desert and forest steppes were more sensitive to precipitation variability than temperature variability while the typical steppe responded to temperature variability more sensitively than the desert and forest steppes.