The concept of fuzzy sets of type 2 has been defined by L. A. Zadeh as an extension of ordinary fuzzy sets. The fuzzy set of type 2 can be characterized by a fuzzy membership function the grade (or fuzzy grade) of which is a fuzzy set in the unit interval [0, 1] rather than a point in [0, 1]. This paper investigates the algebraic structures of fuzzy grades under the operations of join ⊔, meet ⊔, and negation ┐ which are defined by using the extension principle, and shows that convex fuzzy grades form a commutative semiring and normal convex fuzzy grades form a distributive lattice under ⊔ and ⊓. Moreover, the algebraic properties of fuzzy grades under the operations and which are slightly different from ⊔ and ⊓, respectively, are briefly discussed.