Dominant species are crucial in regulating the structure and productivity of plant communities. Adaptation strategies to climate change vary among the dominant species of different life types. However, the responses of the ecological niches of dominant species to warming and precipitation in semi-arid grasslands and their impacts on community structure and function are unknown. This study involved conducting a long-term experimental simulation of warming and increased precipitation on grasslands in Inner Mongolia and studying population dynamics, ecological niches, and their responses to the structure and function of the community species of two dominant plants, L. chinensis (perennial rhizome grass) and S. krylovii (perennial clumped grass). The results show that the niche width of L. chinensis increased and S. krylovii decreased under warming and increased precipitation conditions. The overlap of L. chinensis and S. krylovii decreased under the same conditions. The niche widths of L. chinensis and S. krylovii were 1.22 for the control (C), 1.19 and 1.04 under warming (W) conditions, 1.27 and 0.97 under warming plus precipitation (WP) conditions, and 1.27 and 1.24 under the conditions of precipitation addition (P). The niche overlap of L. chinensis and S. krylovii were 0.72 in C, 0.69 in W, 0.68 in WP, and 0.82 in P. The biomass share and importance value of L. chinensis increased, and those of S. krylovii decreased in response to warming and precipitation. The effects of warming on species diversity and community stability are primarily influenced by the effects on the niche breadth of S. krylovii. Combined with our previous study, L. chinensis will offer more resources in communities in warmer and wetter steppe climates in the future. However, this is not conducive to community diversity.