Grazing systems occupy more of the terrestrial biosphere than any other form of land use, with arid and semi-arid regions supporting disproportionately larger grazing area than other biomes. Two common responses of dryland ecosystems to grazing practices are desertification and woody encroachment, with the former occurring in more arid zones and the latter becoming prevalent in mesic areas. Desertification and woody encroachment are linked to ecosystem impoverishment and land-use abandonment. Desertification leads to fragmented ecosystem structure and decreased carbon storage. Woody encroachment results in increased structural heterogeneity of the landscape, elevated carbon stores aboveground, and variable belowground carbon responses. Nitrogen accumulates under woody plants in both desertification and woody encroachment scenarios, but large-scale changes in nitrogen stocks and trace gas fluxes differ substantially between these types of land degradation. New remote sensing approaches based on imaging spectroscopy allow regional-scale estimates of carbon and nitrogen dynamics that will increase our understanding of desertification and woody encroachment in global grazing systems.