Abstract: A field survey was carried out to measure the variation in the biodiversity of montane shrub grassland communities along an altitudinal gradient in the Xincang village valley, Taktse County in the Lhasa River basin. Community assembly and functional trait diversity were assessed using the Rao index. The aboveground biomass and total coverage of shrubs initially increased and then decreased with increasing altitude. Variation in aboveground biomass (49.18±19.17 g/m²) or total coverage (71%±14%) for alpine meadows among plots along the altitudinal gradient was not high. Species composition indices varied along the altitudinal gradient; Kobresia pygmaea (0.591±0.034) and Carex moorcroftii (0.326±0.061) were the two most dominant species. Species diversity of the shrub-grassland community revealed a unimodal variation pattern along the altitudinal gradient; both species richness and the Shannon-Wiener diversity index initially increased and then decreased from 3992 to 4940 m. Conversely, the Rao index for plant height decreased with increasing altitude. Being the most important factor in the ecological security of the Lhasa river basin, montane shrub grassland should be afforded more scientific attention, particularly the interactions between and the mechanisms underlying species richness, functional traits and ecological processes.