Grassland is one of the largest terrestrial biomes, providing critical ecosystem services such as food production, biodiversity conservation, and climate change mitigation. Global climate change and land-use intensification have been causing grassland degradation and desertification worldwide. As one of the primary medium for ecosystem energy flow and biogeochemical cycling, grassland carbon (C) cycling is the most fundamental process for maintaining ecosystem services. In this review, we first summarize recent advances in our understanding of the mechanisms underpinning spatial and temporal patterns of the grassland C cycle, discuss the importance of grasslands in regulating inter- and intra-annual variations in global C fluxes, and explore the previously unappreciated complexity in abiotic processes controlling the grassland C balance, including soil inorganic C accumulation, photochemical and thermal degradation, and wind erosion. We also discuss how climate and land-use changes could alter the grassland C balance by modifying the water budget, nutrient cycling and additional plant and soil processes. Further, we examine why and how increasing aridity and improper land use may induce significant losses in grassland C stocks. Finally, we identify several priorities for future grassland C research, including improving understanding of abiotic processes in the grassland C cycle, strengthening monitoring of grassland C dynamics by integrating ground inventory, flux monitoring, and modern remote sensing techniques, and selecting appropriate plant species combinations with suitable traits and strong resistance to climate fluctuations, which would help design sustainable grassland restoration strategies in a changing climate.