The Grain-to-Green Program (GTGP) was initiated in China in 2000 to address environmental degradation. In northern China, the central goal of the program is to entice sustainable transitions in resource uses through subsidizing cropland afforestation and grassland exclosure. This study, based on a household survey in Shabianzi, an agropastoral community in the Mu Us Sandy Land, examines farmers’ responses to and the environmental outcome of the GTGP. Results show that through intensification of maize production, farmers were able to assimilate the impact of grassland exclosure, and the new resource use system fosters closer linkage between crop and livestock production. As a result, sheep population in the community shows a steady recovery after the program, hogs experience a sharp increase, while goats register an abrupt decline. Improved household economy resulted from increased livestock offtake rates diminishes pressure on subsistence cultivation, and average household landholding has been stabilized at ∼1.0–1.2 ha. Grassland exclosure is almost universally violated through surreptitious herding; but grazing intensity has been reduced, which leads to vegetation recovery and an improvement in the local environment. Similar transitions are observable within the Mu Us Sandy Land, demonstrating these successful stories are not site-specific, but represent a general pattern. These “islands of sustainability” stress the importance of pathway(s) undertaken by local farmers in understanding the environmental outcomes of the GTGP. They also suggest that even in an endangered environmental region, opportunities for sustainable resource use are still present.