<p>An accurate assessment of shrub–herb interactions is challenging because shrubs can facilitate herb growth as nurse plants and negatively affect herbs as competitors. As responses to the effects of neighbors are often trait dependent, the impact of shrubs on grassland communities may differ with a variation in herb functional traits. In 2020, we surveyed the structure and functional pattern of 160 Qinghai-Tibet alpine grassland communities under the canopy of four dominant shrub species and their surrounding open areas. We found an overall negative effect of shrubs on grassland productivity, species diversity, and individual abundance, suggesting that interspecific resource competition, rather than facilitation, dominated the effect of shrubs on herb growth. The negative effect was weakest for small deciduous shrub species, implying that seasonal defoliation and low shading conditions could reduce the light competition of shrubs on herbs. Shrubs generally increased grassland functional diversity of vegetative traits, especially leaf economic traits, but decreased that of reproductive traits, especially seed traits, demonstrating that shrubs affected grassland community assembly by offering benign microhabitats to protect herbaceous species with stress-intolerant or fast-acquisition vegetative traits and setting physical barriers to prevent the entry of species with specific reproductive traits. Moreover, as canopy transmittance increased, positive shrub effects on leaf size diversity became more pronounced. However, an increase in canopy size intensified the negative effects of shrubs on the diversity of plant height and some reproductive traits. Results illustrated that the structuring of alpine grassland communities by shrubs depends on their type (semi-evergreen or deciduous) and size.</p>