This paper focuses upon the incompatibility between poverty alleviation and environmental conservation and the solution to the incompatibility in an agro-pastoral area of China. The effects on income and grazing pressure of restricting herd size, prohibiting rangeland reclamation, introduction of sedentary beef production, and credit provision were examined using linear programming in a cropping system and a pastoral system in Inner Mongolia, China. Eight scenarios on land use regulations were compared: unrestricted grazing with or without prohibition of rangeland reclamation, four grazing restrictions (1 or 2 sheep equivalent/ha; 5 or 10 sheep equivalent/person), and two grazing prohibitions (half-year or all year). Complete prohibition of rangeland reclamation and grazing reduced income,but with different effects in the two systems. Rangeland reclamation prohibition reduced income more in the cropping system (-26%) than in the pastoral system (-9%), while grazing prohibition reduced income more in the pastoral system (-55%) than in the cropping system (-14%). Grazing restrictions had little effect on income (0 to -9%) in the cropping system, but more severe restrictions (1 sheep equivalent/ha or 5 sheep equivalent/person) had major negative impact on income (-31% and -30% respectively) in the pastoral system. Introduction of sedentary beef production increased income under all three grazing restriction scenarios in both systems, by 30-42% in the cropping system and 3-18% in the pastoral system, relative to unrestricted grazing without land reclamation. Compared with no credit service, providing credit for poor households of the cropping system to introduce sedentary beef production increased their income by 51%, and increased income for poor households in the pastoral system under the grazing restriction of 1 sheep equivalent/ha by 416%.