The impact of livestock grazing on soil nutrients and vegetation parameters was studied in dry montane steppes of southern Mongolia in order to assess the risk of habitat degradation. Data were collected along transects radiating away from permanent water sources. Dung unit density counts revealed gradients of livestock activity, but utilization belts around water sources overlapped, indicating that pastoral land use affects the entire landscape. Dung unit counts corresponded to gradients in soil nutrient parameters (C, N, P), which significantly decreased with distance from the wells. However, no significant correlation was observed for plant species richness and vegetation composition with distance from water source. This indicates that soil parameters and livestock grazing exert a relatively smaller influence on the vegetation than the high inter-annual variability in precipitation. Therefore, the ecosystem at the study site was found to react in a non-equilibrium way, which suggests that the risk of degradation is low, at least insofar as plant community composition is concerned.