The Mongolian Steppe is one of the largest remaining grassland ecosystems. Recent studies have reported widespread decline of vegetation across the steppe and about 70% of this ecosystem is now considered degraded. Among the scientific community there has been an active debate about whether the observed degradation is related to climate, or over-grazing, or both. Here, we employ a new atmospheric correction and cloud screening algorithm (MAIAC) to investigate trends in satellite observed vegetation phenology. We relate these trends to changes in climate and domestic animal populations. A series of harmonic functions is fitted to Moderate Resolution Imaging Spectroradiometer (MODIS) observed phenological curves to quantify seasonal and inter-annual changes in vegetation. Our results show a widespread decline (of about 12% on average) in MODIS observed normalized difference vegetation index (NDVI) across the country but particularly in the transition zone between grassland and the Gobi desert, where recent decline was as much as 40% below the 2002 mean NDVI. While we found considerable regional differences in the causes of landscape degradation, about 80% of the decline in NDVI could be attributed to increase in livestock. Changes in precipitation were able to explain about 30% of degradation across the country as a whole but up to 50% in areas with denser vegetation cover (P < 0.05). Temperature changes, while significant, played only a minor role (r2 = 0.10, P < 0.05). Our results suggest that the cumulative effect of overgrazing is a primary contributor to the degradation of the Mongolian steppe and is at least partially responsible for desertification reported in previous studies.