The seedling bank plays a critical role in vegetation succession, regeneration, and restoration, particularly in disturbed environments under climate change. However, knowledge regarding how seedling banks respond to grazing disturbance under varying precipitation regimes remains limited. In this study, we conducted a threeyear experiment in a semi-arid sandy grassland to examine the effects of grazing intensity (light, moderate, and heavy) and interannual precipitation variation on the seedling bank, aboveground vegetation, and their similarity. Our results demonstrated that grazing significantly influenced the density, species richness, and diversity of both the seedling bank and aboveground vegetation, with these effects being mediated by precipitation. Grazing effects on seedling density varied with precipitation and differed among functional groups: grass density exhibited a unimodal response, peaking under moderate grazing before declining, whereas forb density increased monotonically with grazing intensity. The significance of grazing effects on seedling density within different functional groups determines the overall density variations of annual communities, with seedling/plant density positively correlated with grazing intensity. Aboveground vegetation density for both grasses and forbs mirrored the trends observed in the seedling bank. Light grazing enhanced seedling diversity and evenness, particularly in exceptionally wet years, while moderate grazing promoted species richness and diversity in aboveground vegetation. Compositional similarity between the seedling bank and aboveground vegetation decreased with grazing in wet years but reached its lowest level under moderate grazing in dry year. Additionally, precipitation variability had a relatively minor impact on seedling bank and vegetation characteristics under light grazing. These findings highlight the necessity of functional group-specific grazing management strategies tailored to different precipitation regimes, which will be essential for precision grazing and effective vegetation restoration under future climate scenarios.