Abstract: Shrub-encroached grassland (SEG), referring to a mosaic landscape with shrub patches interspaced with grass patches, is becoming an important and new vegetation type in arid and semiarid region. As a shrub-grass-continuum, the development of shrub patch and grass patch in the SEG alters local and regional water and heat balance, and consequently determines the community structure and ecological function of the vegetation type. We reviewed the distribution, possible mechanism, vegetation characteristics, species composition, and carbon budget of SEG.