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High altitude wetlands on the Tibetan Plateau have been shrinking due to anthropogenic disturbances and global climate change. However, the few studies that have been conducted on wetlands are inconclusive about the effect of soil moisture on seed banks and potential of seed banks in wetlands with different levels of soil moisture for regeneration of dried wetlands. We investigated seed banks and plant communities along a soil moisture gradient. A structural equation model was used to analyze the direct and indirect effects of soil moisture on seed banks, as well as the relationship between plant communities and seed banks. Although soil moisture had no direct effects on seed bank richness and density and indirect effects on seed banks through plant community, it had indirect effects on the seed bank through soil pH. Soil moisture also did not have direct effects on plant community richness, but it had indirect effects through soil pH. Plant community composition changed with soil moisture, but aboveground plant abundance and seed banks composition did not change. Low similarity exists between plant community and seed banks for all wetlands, and similarity decreased along the moisture gradient. The key factor determining plant community diversity was soil pH, while seed bank diversity was mainly affected by soil pH and plant community diversity with wetland drying. Although potential for regenerating the plant community from the seed bank decreased with an increase in soil moisture, drained wetlands still have enough residual seeds for successful restoration of species-rich alpine meadows. [ABSTRACT FROM AUTHOR]