As one of the most serious soil erosion areas in China, red sandstone erosion areas in southern China have been seriously affected by abundant annual rainfall. To understand the effects of AM fungi and different grass strips on soil erosion characteristics in red sandstone erosion areas in southern China, we selected Cynodon dactylon, Lotus corniculatus, Zoysia japonica, and Astragalus sinicus. Two treatments were carried out for each grass: AM was the soil in its original state, and CK was the soil in which the original AM fungi were eliminated. Taking CK treatment as the control group, any changes of runoff and sediment yield and nutrient loss under different grass strip conditions were measured. The total yield of runoff and sediment in the four grass strips under CK treatment was greater than that of AM. The runoff ammonium nitrogen loss concentration in AM treatment was smaller than in CK treatment under continuous scouring. The ammonium nitrogen loss concentration of sediment during continuous scouring showed a decreasing trend. Under AM treatment, the loss concentration of sediment ammonium nitrogen showed a decreasing trend compared with the CK treatment. The percentage of sediment particles >2 mm in the four grass strips was significantly larger for CK treatment than AM treatment (p < 0.05), and except for Cynodon dactylon, the percentage of sediment particles in the size range of 1–2 mm for other grass strips was significantly larger for CK treatment than for AM treatment (p < 0.05); the percentage of sediment particles at 0.02–0.25 mm was significantly smaller for CK treatment than for AM treatment (p < 0.05). The mean weight diameter (MWD) of sediments produced by the four grass strips under simulated scouring showed an overall increasing trend with increased scouring time. The mean weight diameter (MWD) of sediments produced under CK treatment was larger than that of AM treatment. The fractal dimension (D) of sediments showed a decreasing trend with increased scouring time. These results showed that AM fungi can promote the growth of plant roots, strengthen soil anchoring, protect large particle aggregates in soil under rainfall scouring, and reduce soil erosion and nutrient loss in red sandstone erosion areas in southern China. Cynodon dactylon and Zoysia japonica were more prominent than Lotus corniculatus and Astragalus sinicus in inhibiting soil erosion in red sandstone erosion areas.