Inter-annual dynamics of grassland yield of the Three Rivers Headwaters Region of Qinghai-Tibet Plateau of China in 1988-2005 was analyzed using the GLO-PEM model, and the herbage supply function was evaluated. The results indicate that while grassland yield in the region showed marked inter-annual fluctuation there was a trend of increased yield over the 18 years of the study. This increase was especially marked for Alpine Desert and Alpine Steppe and in the west of the region. The inter-annual coefficient of variation of productivity increased from the east to the west of the region and from Marsh, Alpine Meadow, Alpine Steppe, Temperate Steppe to Alpine Desert grasslands. Climate change, particularly increased temperatures in the region during the study period, is suggested to be the main cause of increased grassland yield. However, reduced grazing pressure and changes to the seasonal pattern of grazing could also have influenced the grassland yield trend. These findings indicate the importance of understanding the function of the grassland ecosystems in the region and the effect of climate change on them especially in regard to their use to supply forage for animal production. Reduction of grazing pressure, especially during winter, is indicated to be critical for the restoration and sustainable use of grassland ecosystems in the region.