AbstractWetland degradation is a source of anxiety and is more severe in cold regions than other areas. The soil seed bank acts as a propagule source for revegetation to affiliate the restoration of degraded wetlands. However, the effects of this approach are controversial and depend on the traits of the seed bank and its interactions with the environment. The seed bank in an alpine fen meadow was studied to determine its exact role in revegetation. The surveyed shore of a Tibetan lake, Gahai Lake, was divided into three sites under different levels of grazing pressure. Each site was separated into six transects along a water‐depth gradient to collect soil cores to determine the pattern of biodiversity through a germination experiment in a greenhouse. After an analysis of heterogeneity‐related diversity, partitioning of 58 discovered species indicated that 39.5 could be contributed to beta‐diversity, which was mainly contributed to water depth. Overgrazing (0.607 sheep unit/acre, November—March) decreased seed bank diversity in many respects, especially through decreasing spatial heterogeneity and homogenizing biota. A lightly grazed, well‐protected site had not only the highest beta‐diversity and species abundance but also the highest inter‐site species turnover rate compared with other sites under moderate grazing intensity. Despite the lack of target species, the seed bank serves as (i) a species‐rich pool; (ii) an extant legacy seed source for sustaining heterogeneity and floristic diversity; and (iii) an ecological indicator, and its effect can be reinforced by appropriate grazing practices (multiple intensity) and hydrological modifications. Copyright © 2016 John Wiley & Sons, Ltd.