Abstract: To discuss the impact mechanism of implementation and evolution of grassland contracting system on animal husbandry economic performance, the system was subdivided into three aspects which were the use right, transfer right and usufruct of grassland, theoretical analysis was conducted. Then an econometric model was built based on the production function using related data of Inner Mongolia to explore the impact mechanism empirically. The results showed that during the past three decades after the implementation of grassland contracting system in Inner Mongolia, use right of grassland had becoming more stably. Meanwhile, the transfer right had been confirmed and the usufruct had been improved gradually. The evolution of grassland contracting system played significant effect on animal husbandry economic performance in Inner Mongolia.