Grazing is a pervasive disturbance in arid ecosystems, but its effects on community-level coordination of plant hydraulic and economic traits remain poorly understood. Here, we investigated how long-term grazing alters community-weighted mean hydraulic and leaf economic traits in a desert steppe of Inner Mongolia, and how these shifts affect aboveground biomass (AGB) and water-use efficiency (WUE). Grazing drove a coordinated conservative shift in community hydraulic traits, including more negative osmotic potential at turgor loss point (psi tlp), increased cell wall rigidity (epsilon), and reduced leaf hydraulic conductance (Kleaf). Grazing also restructured trait-function relationships: under grazing, AGB was positively correlated with dehydration tolerance rather than transport efficiency, and WUE was tightly coupled with osmotic adjustment. Variance partitioning showed that hydraulic traits explained 57.4% of AGB variation under grazing, whereas economic traits dominated in the control site (74.5%). Our findings demonstrate that long-term grazing imposes a fundamental reorganization of community-level trait coordination, driving a transition from an efficiency-oriented to a safety-oriented strategy, and highlight the central role of hydraulic traits in mediating ecosystem function under combined stress.