Abstract Aim Compaction of slope soils can substantially hinder root penetration of grass cover, which may be alleviated through the colonisation of arbuscular mycorrhizal (AM) fungi and aggregate stabilisation. We investigated aggregate stabilisation and breakdown mechanisms in compacted dense mycorrhizal soils. Methods A pot-culture experiment with seven treatments (five replicates per treatment) was implemented. In a local decomposed granitic soil, we inoculated two grass species (Chrysopogon ziaanioides and Cynodon dactylon) with AM fungi. We used loose soil to grow C. dactylon to compare it with compacted dense soil, as well as pots without a plant and/or fungal inoculation for comparison. After 20 weeks of cultivation, we measured root and AM fungal characteristics, soil organic matter and aggregate properties by dry sieving, wet sieving and Le Bissonnais methods. Results Compaction led to the formation of macro-aggregates (> 0.25 mm) but had a negative influence on the aggregate stability. The fungal inoculation increased polysaccharide production and aggregate stability in the compacted soil vegetated with C. dactylon. The inoculated C. ziaanioides showed a similar level of aggregate stability as the inoculated C. dactylon, but the uninoculated group demonstrated higher aggregate stability compared with the inoculated group owing to root decomposition. The aggregate stability against various breakdown mechanisms was related to the established aggregate hierarchy and qualitative organic matter inputs. Conclusion Soil organic matter supplied by grass species together with the mediation of AM fungal hyphae played a crucial role in the systemic enhancement of aggregate stability in the compacted soil.