Grassland degradation is a worldwide problem that often leads to substantial loss of soil organic matter (SOM). To estimate the potential for carbon (C) accumulation in degraded grassland soils, we first need to understand how SOM content influences the transformation of plant C and its stabilization within the soil matrix. We conducted a greenhouse experiment using C₃ soils with six levels of SOM content; we planted the C₄ grass Cleistogenes squarrosa or added its litter to the soils to investigate how SOM content regulates the storage of new soil C derived from litter and roots, the decomposition of extant soil C, and the formation of soil aggregates. We found that with the increase in SOM content, microbial biomass carbon (MBC) and the mineralization of litter C increased. Both the litter addition and planted treatments increased the amount of new C inputs to soil. However, the mineralization of extant soil C was significantly accelerated by the presence of living roots but was not affected by litter addition. Accordingly, the soil C content was significantly higher in the litter addition treatments but was not affected by the planted treatments by the end of the experiment. The soil macroaggregate fraction increased with SOM content and was positively related to MBC. Our experiment suggests that as SOM content increases, plant growth and soil microbial activity increase, which allows microbes to process more plant-derived C and promote new soil C formation. Although long-term field experiments are needed to test the robustness of our findings, our greenhouse experiment suggests that the interactions between SOM content and plant C inputs should be considered when evaluating soil C turnover in degraded grasslands.