Aims: Shrub encroachment affects soils, plant communities, and microbial interactions in grassland ecosystems. Arbuscular mycorrhizal fungi (AMF) play crucial roles in maintaining soil-plant dynamics. In this study, the mechanisms through which AMF community diversity and colonization respond to shrub encroachment were investigated, and the key driving factors were identified. Methods: The AMF communities in the roots of grasses and shrubs were analyzed across five shrub encroachment stages (ES1-ES5, from grass-dominated to grass-shrub co-dominated to shrub-dominated) on the Ordos Plateau using high-throughput sequencing and colonization rate measurements. Results: Shrub encroachment reduced soil nutrients and enzyme activities. AMF diversity and colonization in grass showed a hump-shaped pattern, while those in shrub declined continuously. Grass AMF Shannon diversity (3.25 +/- 0.26) was higher than in shrub (2.42 +/- 0.35), but there was no significant difference in colonization. The composition of the AMF community shifted across the different shrub encroachment stages and plant types, with specific taxa associated with each encroachment stage and plant type. Plant nutrients, geography, and soil factors were the primary drivers of grass AMF diversity. Furthermore, shrub AMF diversity was negatively affected by plant morphological traits and positively affected by climate factors. Conclusions: Our findings on the relationships among plant AMF diversity, colonization patterns, and shrub encroachment could contribute to the formulation of stage-specific management strategies for maintaining AMF functionality and ecosystem stability in grasslands.