Overgrazing is a primary driver of biodiversity loss and soil function degradation in grassland ecosystems. To mitigate the negative impacts of overgrazing, grazing exclusion by enclosures has been widely implemented as an effective management strategy for the conservation and restoration of alpine grasslands. This study investigated five paired sites of typical alpine meadows with long-term grazing exclusion (no less than 10 years) and continual grazing on the eastern Qinghai-Tibetan Plateau. Paired t-tests were conducted to assess the long-term effects of grazing exclusion on plant diversity, community similarity, and soil physicochemical properties. Our findings revealed that (1) Plant community α-diversity declined significantly after long-term grazing exclusion. (2) Plant community similarity was lower under long-term grazing exclusion compared to grazed communities. Notably, similarity trends differed among functional groups, with forbs being the main driver of reduced community similarity. (3) Principal Component Analysis (PCA) indicated that communities under grazing exclusion were linked to fast-growing plant traits and soils with higher organic matter content. In contrast, grazed communities were associated with higher species richness and greater structural complexity. Structural Equation Modeling (SEM) further demonstrated that grazing exclusion altered soil physicochemical properties, consequently influencing plant traits and growth strategies, ultimately driving the observed reduction in α-diversity and an increase in β-diversity. While grazing exclusion promotes plant productivity, our study demonstrates that it concurrently leads to reduced species diversity and decreased structural stability within plant communities. Therefore, moderate grazing management should be integrated with grazing exclusion such as enclosure periods less than ten years may better balance restoration and diversity in the alpine grassland.