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The semi-private property rights arrangement called the Household Production Responsibility System (HPRS) was started in the early 1980s in Xilingol pasture of Inner Mongolia (China), and stimulated the development of stockbreeding. The grassland has been degrading severely with increasing numbers of livestock. Based on a historical review of property rights regimes in Inner Mongolia and empirical surveys in Xilingol pasture during 2001–2003, this paper assesses the implementation of HPRS and its impacts on incomes of households as well as the environmental impact on the grassland. It was found that HPRS does not mitigate the “Tragedy of the Commons”, instead it has exacerbated the situation. It was also found that co-management of grassland and livestock among a few households presents a sustainable use of grassland to develop livestock breeding. We conclude with the recommendation that small-scale collective property rights systems should be encouraged in Xilingol pasture of Inner Mongolia. [Copyright &y& Elsevier]