Livestock grazing is often thought to enhance native plant species co-existence in remnant grasslands but may also favour exotic invaders. Recommendations for appropriate grazing strategies are needed, for which an understanding of the response of plant species is necessary. We explored the response of plant species and plant functional groups to grazing in temperate grassland of the Monaro Tablelands of south-east Australia by comparing species abundance in adjacent areas that differed in livestock grazing regime (minimal, infrequent and frequent). We also examined whether species with similar responses to grazing share certain traits and consider whether these traits might provide a useful method of assessing grazing impact. At the scale measured (0.25 m2), an infrequent grazing regime maximised plant species co-existence in these grasslands due to widespread invasion by exotic plant species at infrequent grazing intensity. Many native species declined in abundance when grazing frequency increased from minimal to infrequent. Annuals invaded under infrequent grazing while perennials declined most strongly under high frequency grazing. Low levels of grazing apparently reduce cover and create sites suitable for seed recruitment whereas more frequent grazing reduces the persistence of perennials. While there was a tendency for native species to be more susceptible to grazing impact than exotics, plant traits, in particular longevity (perennial, annual) provided a better prediction of the response of plants to grazing. Although a few native plant species persisted at high grazing frequency, even infrequent livestock grazing may not be appropriate for the conservation of many native perennial grassland species. Targeted reductions in grazing frequency may be necessary to enable the long-term coexistence of grazing susceptible species.