Understory vegetation is essential for maintaining biodiversity and conserving soil and water in degraded plantations. Although thinning and terracing are widely used to optimize eco-rehabilitation in water-limited areas, their combined effects on understory vegetation remain unclear. In this study, we implemented a 2 & times; 5 factorial design crossing terracing type (counter-slope and half-moon terraces) with thinning intensity (0%, 15%, 30%, 45%, and 60%) in Pinus tabuliformis plantations on the semi-arid Loess Plateau, China. We disentangled the combined effects of thinning and terracing on understory taxonomic, functional, and phylogenetic diversity, as well as herbaceous biomass, using variation partitioning (VP) and partial least squares path modeling (PLS-PM). Our results indicated that thinning produced greater increases in understory diversity and biomass in counter-slope terraces than in half-moon terraces. In counter-slope terraces, thinning >= 30% increased understory diversity by 24-130% and herbaceous biomass by 200-640%, peaking at 30-45%. In half-moon terraces, diversity and biomass increased by 8-60% and 180-220% under thinning >= 45%, with the strongest responses at 45-60%. VP and PLS-PM identified thinning as the primary driver, with understory vegetation enhancement mediated by soil moisture and understory light in counter-slope terraces, and by understory light and soil nutrients in halfmoon terraces. We recommend 30-45% thinning on counter-slope terraces and >= 45% thinning on half-moon terraces in these semi-arid P. tabuliformis plantations. These findings support terrace-specific, adaptive thinning strategies, with intensity adjusted stepwise to post-thinning ecosystem responses, providing a feasible basis for effective eco-rehabilitation on the Loess Plateau and other water-limited regions.