Alpine rangeland in the Northern Tibetan region of China plays important role not only in yak and Tibetan sheep production, but also in the ecological safety shelter zone for China, even Southeast Asia region. However, the alpine rangeland degradation in this area has caused the water erosion, low economic development, and poor living of herders, which create a dilemma of sustainable development of the northern Tibetan region. Thus alpine rangeland degradation not only threatens the local ecological safety and life of the local residents, but also threatens further ecological security of the down-streams of the rivers and the Southeast Asia rivers. Ecological compensation is seen as an innovative approach to controlling degradation of rangeland by making compensation to rangeland users in return for adopting practices that secure rangeland ecosystem conservation and restoration of degradation alpine rangeland. Therefore, on the basis of closely combining the problems in natural science and economical development policy in social science, establishing effectively ecological compensation mechanism of rangeland by evaluating ecological services value of rangeland and is urgent to maintain ecological services function of rangeland and coordinate the relationships among population, resource environment and economic development, which will provide useful information for protecting rangelands from the further degradation and achieving sustainable development of ecological, economic and social. The aim of this study was to design the efficient mechanism and implementation scheme of ecological compensation for rangeland ecosystem in the northern Tibet regions. As a case of the study, four indicators, including productivity, importance of seasonal grazing, ecological services value, and ecological environmental sensitivity of each alpine rangeland subtype were applied to design the functional sectors model for rangeland management in this study for determining ecological compensation regions in the Naqu region of northern Tibet. This study classified alpine rangelands of the Naqu region in northern Tibet into the production sector with moderate grazing, restoration sector with reducing livestock number, and conservation sector by anti-grazing. In function sectors, the grades of ecological compensation were designed for alpine rangeland. On the basis of grading results, this study proposed the organization management system and its process, the profit and loss evaluation mechanism and constraint the mechanism of rewards and the punishments of ecological compensation. The corresponding ecological compensation plan was made in the Naqu region of northern Tibet. Based on the results of functional sectors and their grades, content and target of the ecological compensation for different functional area of alpine rangeland in the Naqu region of northern Tibet were established and presented, in which the ecological compensation period was considered as 5 yeares and the total ecological compensation fund for alpine rangeland of the Naqu region was 35.77 billion RMB, which was allocated 19.4 billion RMB for the moderate production sector, 15.77 billion RMB for restoration sector, and 0.6 billion RMB for conservation sector. The mechanism of ecological compensation for rangelange, based on the functional sectors and grading compensation, has important significance in theory and practice, which would provide the valuable information for alpine rangeland ecological protection, increase in economic income of herdsman and the sustainable development of alpine rangeland ecosystem.