There has been a limited understanding of herdsmen's livestock reduction behavior (positive vs. negative) as an evaluation index of the successful implementation of the grassland subsidy and reward policy in Inner Mongolia (IM). In remedy, we investigated herdsmen livestock reduction behavior and the strategies involved based on the survey data obtained from 844 herdsmen in 15 banners (counties) across the grassland types in IM using a sample t-test and Binary Logit model. We found that herdsmen with lower total cash income, fewer livestock resources, lower nonhusbandry income, and those living farther away from the city complied with the policy directive by reducing livestock numbers. More herdsmen in the desert region (38.42%) decline stock size than other grassland types. Herdsmen of Han origin were more inclined to reduce livestock numbers than the Mongolia or Manzu group. There is a need to improve the incentives of the subsidy and reward program, incorporate technical managerial skills to educate herders on the merit of focusing on production per head of animals as collateral for livestock reduction to raise herdsmen income, and foster better grassland ecological environment. In addition, herdsmen who comply with the policy directive should be identified and offered more prosperous support, such as market information and better feeding strategies to promote the sustainability of their livelihood and the grassland ecosystem. It is suggested that the top-down approach of implementing the subsidy and reward policy in IM should be reversed for improved household welfare, compliance with policy directives, and sustainable pastoral development.