Grassland degradation has impacted the Qinghai-Tibet Plateau over recent decades, with bare patches and Ligularia virgaurea-degraded grasslands serving as typical examples. The effects of grassland degradation on soil nutrients, microbial communities, seed banks, and vegetation restoration potential were investigated to identify restoration techniques for degraded grasslands. The contents of total nitrogen, phosphorus, potassium, water, and organic carbon in degraded grasslands decreased significantly, whereas pH and nitrate nitrogen content increased. CaCO3 content was highest in bare patches, followed by L. virgaurea-degraded grasslands, which were higher than that in non-degraded grasslands by 76.46% and 54.09%, respectively (P < 0.05). Water content in the two types of degraded grasslands was significantly lower than that in non-degraded grasslands, by 18.4-22.85%. Brassinosteroid content in bare patches and L. virgaurea-degraded grasslands decreased by 44.18% and 80.66%, respectively. The soil seed bank composition in degraded areas changed significantly, shifting toward higher forb abundance, while Poaceae decreased by 55.21-78.13%. The germination rate of Elymus nutans seeds treated with soil extracts from degraded grasslands did not change significantly. Bacteria in non-degraded grasslands were significantly enriched for brassinosteroid biosynthesis pathway function. Bacteria associated with brassinosteroid biosynthesis were classified as Beggiatoa Trevisan 1842 (Approved Lists 1980) and members of the class Deltaproteobacteria Kuever et al. 2006 and order Chromatiales Imhoff 2005. Compared with non-degraded grasslands, soil microorganisms in degraded grasslands were unfavorable to seed germination. Therefore, artificial restoration of the grassland soil seed bank, optimization of the soil microbial community, and maintenance of soil moisture are crucial to the restoration of the aboveground plant community.